CERC issued final Guidelines for Virtual Power Purchase Agreements on 24 December 2025; they were published in the Gazette on 28 January 2026, followed by a Statement of Reasons on 27 April 2026. The Guidelines create a final framework, but state that commencement is from a date separately notified by CERC, so parties must verify that commencement notification before treating a VPPA as operational.
Key Takeaways
- CERC consulted on Draft Guidelines in May 2025, then issued final VPPA Guidelines on 24 December 2025; Gazette publication followed on 28 January 2026 and a Statement of Reasons on 27 April 2026.
- The final Guidelines describe VPPAs as non-transferable specific-delivery, over-the-counter contracts, with bilateral settlement between an agreed strike price and the generator’s settlement price.
- They provide for transfer of eligible Renewable Energy Certificates to the consumer for RPO/RCO use, with extinguishment on use; VPPA-linked RECs cannot be traded.
- A VPPA does not physically deliver electricity to the buyer, reduce site demand charges, secure network access or hedge every component of a retail bill.
- As of this guide’s date, procurement teams should verify the separately notified commencement date and the amended REC framework before execution. Final Guidelines are not the same as confirmed operational commencement. This is general information, not legal or financial advice.
What is the regulatory chronology?
CERC’s public notice says the Ministry of Power asked it on 3 March 2025 to devise a suitable VPPA framework. The notice relied on Regulation 54(3) of the Power Market Regulations, 2021, which allows CERC to deal with matters not otherwise provided for in those regulations.
The Draft VPPA Guidelines recorded SEBI’s 31 January 2025 opinion that non-tradable, non-transferable bilateral OTC VPPAs could be treated as non-transferable specific-delivery contracts outside the Securities Contracts Regulation Act and within CERC’s regulatory purview.
The final text changed terminology and details: “VPPA Price” became “VPPA Strike Price,” “Market Price” became “Settlement Price,” and the minimum contract term is one year. Importantly, the final Guidelines say they take effect from a date separately notified by CERC. Publication and operational commencement are therefore distinct checks.
A separate CERC order in Petition 338/MP/2025 concerns exchange green-contract classifications and related market processes. It should not be used as the commencement notification for the VPPA Guidelines.
How would the proposed VPPA work?
Under the final Guidelines, a consumer or designated consumer may agree a VPPA Strike Price with a renewable generating station for a term of at least one year. The generator sells physical electricity through a mode authorised under the Electricity Act or Power Market Regulations. The parties then settle the difference between the agreed strike price and the Settlement Price under their bilateral terms.
| Feature | Proposed VPPA | Physical open-access PPA | Unbundled REC purchase |
|---|---|---|---|
| Electricity delivered to buyer | No | Yes, subject to network approvals | No |
| Financial price settlement | Core feature | Usually embedded in energy invoice | No energy settlement |
| Green attribute | REC transfer proposed | Depends on contract and eligibility | REC itself |
| Site network charges affected | No direct effect | Yes | No |
| Multi-site aggregation | Potentially convenient | State and meter complexity | Convenient |
| Status in cited documents | Final Guidelines; commencement date must be verified | Existing routes vary by state | Existing REC framework |
The distinction from a physical open-access solar arrangement is central. In a VPPA, the corporate buyer continues purchasing physical electricity for its sites under existing retail, captive, open-access or market arrangements.
How are RECs proposed to move and be extinguished?
The final framework requires the renewable project to satisfy the REC Regulations and applicable registration conditions. RECs issued for VPPA-contracted capacity are transferred to the consumer or designated consumer. The 2026 REC amendment provides for their use toward RPO or RCO; certificates are extinguished when used for compliance. Surplus VPPA-linked certificates may be carried forward but cannot be traded.
The final Guidelines and REC amendment must be read together with registry procedure and commencement status. Contract language should not promise immediate issuance, transfer or extinguishment where a required operational process is not yet available.
Why could multi-site companies consider a VPPA?
A multi-state company faces different open-access thresholds, charges, banking rules and approvals. A VPPA can aggregate a renewable commitment without routing project electricity to each meter. It may support project financing through a price commitment.
A VPPA is therefore best assessed as a financial hedge plus attribute procurement, not as “cheap power delivered to every site.” Companies should compare it with physical open access, group captive, green tariffs and REC-only procurement. Our capex, opex and open-access comparison and group captive guide provide starting points for those alternatives.
What does a VPPA not do?
It does not grant connectivity, GNA, state open access, scheduling rights or transmission capacity to the corporate buyer. It does not physically balance the buyer’s hourly load. It does not automatically reduce cross-subsidy surcharge, additional surcharge, wheeling charges, demand charges or distribution losses. Those costs belong to the buyer’s actual electricity supply arrangements.
It also does not guarantee an accounting outcome. Treatment under Indian accounting standards, tax rules, treasury policy and derivative controls needs specialist review based on final contract terms. Nor does a transferred REC automatically validate every public environmental statement; claim wording should follow the company’s reporting framework and assurance process.
How should a buyer evaluate a commencement-dependent VPPA?
Which regulatory condition should come first?
Make effectiveness conditional on the separately notified commencement date, required registrations and an available REC transfer process. Identify provisions taken from the final Guidelines rather than the superseded 2025 draft. Do not sign a contract that assumes REC issuance, transfer and extinguishment can occur before the relevant framework and registry process are operational.
Which commercial variables need modelling?
Model hourly or monthly generation shape, reference-market prices, buyer retail costs, settlement volume, degradation, curtailment and REC shortfall. Run high-price, low-price and persistent basis-risk scenarios. A contract-for-differences can create cash volatility even when its long-term expected value looks attractive.
Which protections belong in the term sheet?
Specify project, capacity, term, strike price, Settlement Price, settlement interval, volume cap, market disruption, REC eligibility, transfer deadlines, underproduction, credit support, tax, audit rights, change in law, termination payment and dispute resolution. The final Guidelines leave bilateral commercial settlement and disputes to contract terms, making drafting particularly important.
The buyer should also test price risk through its standard investment framework. Our solar finance comparison is useful for contrasting balance-sheet and contracted alternatives, although VPPA treasury treatment requires separate advice.
What is a sensible 2026 decision path?
First, check CERC’s website and Gazette record for the separate commencement notification and current REC procedure. Second, define the objective: RPO/RCO compliance, voluntary attributes, price hedging, new-project support or a combination. Third, compare physical and financial options on the same risk-adjusted basis. Fourth, obtain accounting, tax, regulatory and claims reviews. Fifth, negotiate a term sheet with explicit commencement and registry conditions.
The approval paper should value the electricity hedge, REC attributes and project impact separately.
Frequently Asked Questions
Did CERC issue final VPPA Guidelines?
Yes. CERC issued final Guidelines on 24 December 2025, followed by Gazette publication and a Statement of Reasons. However, the final text ties commencement to a date separately notified by CERC; verify that notification before execution.
Does a VPPA supply electricity to corporate sites?
No. The generator sells physical electricity elsewhere. The buyer separately procures site electricity and settles the contractual price difference.
Can the buyer resell transferred RECs?
No. The final framework makes VPPA-linked RECs non-tradable. They are extinguished when used for RPO/RCO compliance; eligible surplus may be carried forward under the amended REC rules.
Can a VPPA meet RCO obligations?
The final Guidelines and amended REC rules allow eligible transferred RECs to support RPO/RCO compliance, subject to registration, commencement and the applicable registry process.
Is a VPPA the same as group captive solar?
No. Group captive involves ownership and consumption tests and physical supply. A VPPA is proposed as a financial OTC contract with attribute transfer.
What is the largest commercial risk?
There is no single answer. Basis risk, counterparty credit, undergeneration, REC eligibility and change in law can each dominate depending on contract design.
Sources
- CERC: Draft Guidelines for Virtual Power Purchase Agreements
- CERC: Public Notice on Draft VPPA Guidelines
- CERC: Stakeholder comments on Draft VPPA Guidelines
- Norton Rose Fulbright: CERC’s final VPPA Guidelines—key takeaways
- S&R Associates: final Guidelines, Gazette publication and Statement of Reasons chronology
- CERC: Order in Petition 338/MP/2025
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