CERC Nears Final Rules for VPPAs, Unlocking Financing for 40 GW RE Projects

After the Central Electricity Regulatory Commission (CERC) issued the draft guidelines for virtual power purchase (VPPA)agreements earlier in 2025, it is now hinting at soon releasing its final guidelines for VPPAs. It's estimated to potentially unlock financing for over 40 gigawatts of stranded renewable energy projects across the country, said the Federation of Indian Chambers of Commerce & Industry (FICCI).  

S.K. Chatterjee, Chief of Regulatory Affairs at the Central Electricity Regulatory Commission, told FICCI’s webinar on VPPA that the commission was "almost at the final stage of finalising" the framework after receiving extensive stakeholder feedback on draft guidelines released in May. While mentioning these details in a release, FICCI said, "The announcement signals a breakthrough for the country’s renewable energy sector, which has concerns with traditional power purchase agreements regarding delays in payment from distribution companies."

"We want these kinds of agreements to align with our larger objectives of achieving sufficient renewable energy capacities, which could be realised through means other than traditional power purchasing agreements," Chatterjee said during the webinar.

Shedding light on the importance of VPPAs, FICCI explained, "The final guidelines will determine whether corporate buyers can transfer agreements to subsidiaries and address technical aspects of renewable certificate accounting. Industry observers expect the framework to accelerate India's target of 500 gigawatts of renewable capacity by 2030, providing an alternative to traditional utility-scale procurement models."

Key Takeaway:

FICCI explained, "The commission (CERC) conceived virtual PPAs to serve two critical purposes: enabling stakeholders to obtain green attributes for environmental, social, and governance compliance without requiring traditional power purchase agreements and supporting over 40 gigawatts of renewable energy projects."

Sharing the benefit of Virtual PPAs, it said, "It allows corporate buyers to financially underwrite renewable projects without taking physical delivery of electricity, instead receiving renewable energy certificates as proof of green power procurement. The regulator has structured the guidelines to ensure VPPAs qualify as non-transferable specific delivery contracts rather than financial derivatives, following consultations with the Securities and Exchange Board of India. Physical delivery of electricity must occur, though not directly to the corporate buyer, with the power sold into wholesale markets instead."

Ashish Mittal, Director, Consulting - Energy & Commodities, CRISIL Intelligence, highlighted the global precedent for virtual agreements, noting that 80% of corporate renewable energy procurement in the United States now uses virtual structures. "It is time for India to embrace it," Mittal said, while calling for standardised contracting frameworks and formal dispute resolution mechanisms.

Rajasthan has endorsed the framework despite concerns about market pricing volatility during solar generation hours. Rohit Gupta, Chairman & Managing Director of Rajasthan Renewable Energy Corporation, stated that the state would "support this initiative as much as possible" while highlighting potential integration challenges.

Subhro Paul, Director (Financial & Commercial Appraisal), Central Electricity Authority, noted the mechanism would benefit both industrial buyers seeking renewable energy compliance and project developers requiring revenue certainty, describing it as "instrumental in bringing up a large quantity of renewable power" based on international experience.