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CERC Proposes Virtual PPA Framework to Boost Renewable Energy Trading

India's power market regulator, the Central Electricity Regulatory Commission (CERC), has proposed draft amendments to the Power Market Regulations, 2025, introducing virtual power purchase agreements (VPPAs) to enhance renewable energy trading. The VPPA is a financial contract enabling consumers, especially large industrial buyers, to meet their renewable energy obligations (REOs) without physically receiving the electricity generated.

Under the VPPA model, a consumer enters into a fixed-price agreement with a renewable energy generator, who then sells the power in the open market. The financial settlement is based on the difference between the fixed VPPA price and the actual market price. These contracts will be treated as over-the-counter (OTC) financial instruments and are expected to drive more flexible, market-driven participation in clean energy sourcing.

This regulatory move aligns with recent developments in India’s power markets, including the National Stock Exchange and MCX announcing the launch of power derivative contracts.

Together, these tools are expected to deepen the power market, encourage private sector engagement in clean energy, and provide a reliable framework for RE purchase compliance. The proposal also comes at a time when industrial energy consumers are increasingly seeking cost-effective and legally compliant routes to decarbonization.