India Proposes Virtual Power Agreements to Supercharge Renewable Energy Trading

New Delhi, Jun 18 (KNN) India’s Central Electricity Regulatory Commission (CERC) has unveiled a draft amendment to electricity trading rules aimed at integrating Virtual Power Purchase Agreements (VPPAs) into the power markets, as part of its draft Power Market Regulations, 2025.

Under this novel framework, large industrial consumers can enter into over-the-counter (OTC) contracts with renewable energy producers to “virtually” purchase electricity at a predetermined rate—without physically taking delivery of power.

The VPPA agreement mechanism works by having generators sell the electricity in the open market, while consumers pay or receive the financial difference between the fixed VPPA price and actual market prices.

This innovative tool is expected to help corporations meet clean energy mandates and promote renewable investment.

However, analysts caution that VPPAs could be used merely as “paper offsets,” allowing companies to claim 100 per cent renewable consumption without driving actual clean energy usage.

The proposal also includes expanded surveillance powers for CERC, enabling it to audit and inspect power exchanges and OTC platforms.

The timing coincides with the National Stock Exchange (NSE) and Multi Commodity Exchange of India (MCX) planning their own power derivatives contracts—aimed at deepening the market and offering new hedging tools.

CERC has invited public feedback on the draft until July 14, after which the regulator plans to finalize the rules. Advocates of the VPPA framework see it as a strategic step toward financial innovation in renewable energy markets and a move aligned with India’s broader decarbonization goals.

Skeptics, however, warn that without strong enforcement, the mechanism may result in companies meeting targets through financial engineering rather than actual green consumption.

If adopted, VPPAs could mark a key evolution in India’s power markets—blending sustainability with financial sophistication while expanding options for corporate renewable procurement.

(KNN Bureau)