CERC Approves Rules for Virtual Power Deals to Help Companies Meet Green Energy Targets

CERC Approves Rules for Virtual Power Deals to Help Companies Meet Green Energy Targets

January 1, 2026

India’s Central Electricity Regulatory Commission (CERC) has put in place formal regulations for Virtual Power Purchase Agreements (VPPAs), giving clear legal backing to this form of renewable energy contract and filling a regulatory gap that existed until now. The new framework will allow large power users to fulfil their renewable obligations through financial deals linked to green energy certificates rather than physical supply of electricity, bringing certainty and structure to the VPPA market.

Under the updated rules, a VPPA must run for at least one year and is treated as a bilateral, non-tradable contract between a renewable energy generator and a buyer such as a corporate, open access consumer or distribution company. The regulator has clarified that renewable generators can sell electricity through authorized channels under the Electricity Act, 2003 and Power Market Regulations, 2021, while buyers can use the Renewable Energy Certificates (RECs) they receive through VPPAs to meet their Renewable Consumption Obligations (RCOs). Payments are settled financially based on a pre-agreed strike price compared with market prices, with the difference made up according to the contract terms. 

The framework also includes safeguards such as requiring generators to provide undertakings to the REC Registry to prevent double counting of renewable capacity and mandating that any disputes under a VPPA be resolved through mutual agreement between the parties. By offering regulatory clarity and a structured approach to virtual renewable contracts, the CERC’s initiative is expected to boost confidence among buyers and developers, support compliance with green energy goals, and serve as an alternative to traditional power purchase agreements.