CERC Issues Regulatory Framework for Virtual PPAs to Support RCO Compliance
The Central Electricity Regulatory Commission has issued comprehensive guidelines for Virtual Power Purchase Agreements (VPPAs), establishing a regulatory framework for bilateral OTC renewable energy contracts that help designated consumers meet their Renewable Consumption Obligation targets.
December 26, 2025. By Mrinmoy Dey
The guidelines classify VPPAs as Non-Transferable Specific Delivery (NTSD) bilateral contracts under CERC’s jurisdiction, following a clarification from SEBI earlier this year.
The Commission noted that VPPAs have emerged globally as an innovative mechanism to enable large energy consumers, including distribution licensees, open-access users and captive consumers, to supplement physical procurement of renewable power with contract-based instruments aligned to compliance obligations.
The guidelines follow the Ministry of Power’s request to develop a suitable regulatory framework for enabling RCO compliance through VPPAs.
Under the framework, a VPPA is defined as a non-tradable, non-transferable bilateral OTC contract between a renewable energy generating station (REGS) and a consumer or designated consumer, wherein the buyer guarantees payment of a mutually agreed “VPPA strike price” for the duration of the contract.
The REGS will sell generated electricity through power exchanges or other authorised modes for purposes other than RPO/RCO compliance. “The difference between the VPPA Strike Price and the Settlement Price shall be settled bilaterally between the contracting parties in accordance with mutually agreed terms and conditions,” it said.
A key feature of the mechanism is that Renewable Energy Certificates (RECs) issued against the contracted REGS capacity will be transferred to the consumer or designated consumer for RPO/RCO compliance; such certificates will not be tradable and will be extinguished on use, though surplus certificates may be carried forward for future compliance years. The VPPA must have a minimum tenure of one year, and contracting parties remain bound by the agreement for its entire duration.
The guidelines also stipulate that REGS participating in VPPAs must be registered in accordance with the Central Electricity Regulatory Commission (Terms and Conditions for Renewable Energy Certificates for Renewable Energy Generation) Regulations, 2022.
The REGS must submit an undertaking for capacity contracted through VPPA to the REC Registry to avoid any double accounting of the said REGS capacity.
Any disputes arising from VPPA contracts are to be resolved mutually as per contract terms.
CERC said the framework is intended to expand the toolkit available to obligated entities for meeting renewable consumption targets, while ensuring contractual integrity, regulatory oversight, and market transparency in VPPA-linked REC transactions.
The guidelines will come into effect from a date to be notified separately and may be reviewed periodically, CERC stated.
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