India’s CERC proposes virtual power purchase agreement

India’s Central Electricity Regulatory Commission (CERC) has proposed amendments to its electricity trading rules, introducing the concept of a virtual power purchase agreement (VPPA).

This financial instrument assists consumers in fulfilling their renewable energy obligations and facilitates power trading without physical delivery.

Under the new draft Power Market Regulations, 2025, a VPPA will enable consumers to lock in a fixed price with renewable energy producers, as reported by Reuters.

These producers will then sell the generated electricity on the open market.

The financial settlement between parties occurs when there is a difference between the agreed-upon VPPA price and actual market rates.

Analysts at Ember have raised concerns that while VPPAs provide an innovative approach for large-scale consumers to adhere to their green consumption mandates, they might simply become tools for compliance rather than driving genuine clean energy usage.

As per reports in early June 2025, these agreements could allow entities to claim full reliance on renewables regardless of actual consumption patterns.

In related developments, prominent Indian exchanges such as the National Stock Exchange and the Multi Commodity Exchange recently announced plans to introduce power derivative contracts.

The move is seen as another step towards modernising India’s power sector by offering new ways for stakeholders to hedge against price volatility and enhance liquidity in the market.

CERC’s draft regulations suggest increasing regulatory oversight by granting additional powers for inspecting and auditing both power exchanges and over-the-counter platforms.

With these enhanced capabilities, CERC aims to ensure greater transparency and efficiency within the sector. Stakeholders are invited by CERC to submit their feedback on this draft proposal before 14 July 2025, after which the finalisation of these potentially transformative regulations will proceed.