India proposes virtual power purchase agreements for industrial companies

India's Central Electricity Regulatory Commission proposes a new financial instrument enabling industrial companies to meet renewable energy targets through virtual contracts, without physical electricity delivery, thus facilitating compliance management.

Share:

India’s Central Electricity Regulatory Commission (CERC) recently proposed amending its electricity market regulations to introduce a new financial contract called Virtual Power Purchase Agreement (VPPA). This instrument will enable large industrial consumers to meet their renewable energy regulatory obligations without managing physical delivery of produced energy. According to the draft Electricity Market Regulations 2025, this virtual agreement will be negotiated directly between renewable energy producers and industrial consumers. The mechanism provides financial compensation for the difference between the contractually agreed price and the actual market price.

Principle and operation of the VPPA

In practice, the VPPA sets a reference price for electricity between the renewable energy producer and the industrial consumer. The producer then sells electricity on the open market, with the difference between the market price and the contracted tariff financially settled between the two parties. This mechanism allows companies to meet renewable energy commitments without logistical constraints related to physical delivery. The Indian regulator clearly specifies that these virtual contracts are considered over-the-counter (OTC) agreements, expanding the range of financial instruments available to industrial stakeholders.

The CERC emphasizes that the VPPA mechanism primarily aims to simplify compliance for industries with renewable energy obligations. This proposal comes as Indian companies face increasingly stringent regulatory requirements regarding renewable energy consumption. This new instrument could thus reduce administrative complexities associated with these legal constraints.

Criticism and other market developments

However, certain analysts, notably from the organization Ember, have highlighted that such contracts could become mere compliance tools, allowing companies to declare full renewable energy consumption without actual operational changes. The public consultation on this regulatory proposal is open by the CERC until July 14, during which stakeholders may submit their comments.

Additionally, India’s two major exchanges, the National Stock Exchange and the Multi Commodity Exchange of India (MCX), recently announced the imminent launch of electricity derivative contracts. These financial products could complement VPPAs by providing industrial stakeholders with additional tools to manage their exposure to electricity market price fluctuations.

A major electricity blackout paralyzed large parts of the Czech Republic, interrupting transport and essential networks, raising immediate economic concerns, and highlighting the vulnerability of energy infrastructures to unforeseen technical incidents.
French greenhouse gas emissions are expected to rise by 0.2% in the first quarter of 2025, indicating a global slowdown in reductions forecast for the full year, according to Citepa, an independent organisation responsible for national monitoring.
The Republican budget bill passed by the U.S. Senate accelerates the phase-out of tax credits for renewable energies, favoring fossil fuels and raising economic concerns among solar and wind industry professionals.
Rapid growth in solar and wind capacities will lead to a significant rise in electricity curtailment in Brazil, as existing transmission infrastructure remains inadequate to handle this massive influx of energy, according to a recent study by consulting firm Wood Mackenzie.
In April 2025, fossil fuels represented 49.5% of South Korea's electricity mix, dropping below the symbolic threshold of 50% for the first time, primarily due to a historic decline in coal-generated electricity production.
The US Senate Finance Committee modifies the '45Z' tax credit to standardize the tax treatment of renewable fuels, thereby encouraging advanced biofuel production starting October 2025.
According to the 2025 report on global energy access, despite notable progress in renewable energy, insufficient targeted financing continues to hinder electricity and clean cooking access, particularly in sub-Saharan Africa.
While advanced economies maintain global energy leadership, China and the United States have significantly progressed in the security and sustainability of their energy systems, according to the World Economic Forum's annual report.
On the sidelines of the US–Africa summit in Luanda, Algiers and Luanda consolidate their energy collaboration to better exploit their oil, gas, and mining potential, targeting a common strategy in regional and international markets.
The UK's Climate Change Committee is urging the government to quickly reduce electricity costs to facilitate the adoption of heat pumps and electric vehicles, judged too slow to achieve the set climate targets.
The European Commission will extend until the end of 2030 an expanded state-aid framework, allowing capitals to fund low-carbon technologies and nuclear power to preserve competitiveness against China and the United States.
Japan's grid operator forecasts an energy shortfall of up to 89 GW by 2050 due to rising demand from semiconductor manufacturing, electric vehicles, and artificial intelligence technologies.
Energy-intensive European industries will be eligible for temporary state aid to mitigate high electricity prices, according to a new regulatory framework proposed by the European Commission under the "Clean Industrial Deal."
Mauritius seeks international investors to swiftly build a floating power plant of around 100 MW, aiming to secure the national energy supply by January 2026 and address current production shortfalls.
Madrid announces immediate energy storage measures while Lisbon secures its electrical grid, responding to the historic outage that affected the entire Iberian Peninsula in late April.
Indonesia has unveiled its new national energy plan, projecting an increase of 69.5 GW in electricity capacity over ten years, largely funded by independent producers, to address rapidly rising domestic demand.
French Minister Agnès Pannier-Runacher condemns the parliamentary moratorium on new renewable energy installations, warning of the potential loss of 150,000 industrial jobs and increased energy dependence on foreign countries.
The European battery regulation, fully effective from August 18, significantly alters industrial requirements related to electric cars and bicycles, imposing strict rules on recycling, supply chains, and transparency for companies.
The European Parliament calls on the Commission to strengthen energy infrastructure and accelerate the implementation of the Clean Industrial Deal to enhance the continent's energy flexibility and security amid increased market volatility.
The European Commission unveils an ambitious plan to modernize electricity grids and introduces the Clean Industrial Deal, mobilizing hundreds of billions of euros to strengthen the continent's industrial and energy autonomy.