Tag: Corporate Governance and ESG

Certain changes to the Indian regulatory framework, as applicable to virtual power purchase agreements (“VPPAs”), have been recently proposed by the Central Electricity Regulatory Commission (“CERC”) pursuant to draft regulatory instruments – including through VPPA-specific guidelines, as well as necessary amendments to existing CERC regulations related to the power market and renewable energy certificates (“RECs”), respectively.
With the broad aim of enabling power consumers and obligated entities to meet their respective renewable consumption obligations (“RCOs”) pursuant to the Indian Government’s decarbonization targets and proposed energy security transition, and given the acknowledged utility of VPPAs to facilitate such mandatory RCO compliance, the draft amendments aim to (i) integrate VPPAs into the Indian power market, including by defining the nature and essential features of such contracts, and establishing their placement within the over-the-counter (“OTC”) market, (ii) provide concrete mechanisms for VPPAs to function as viable market instruments, and (iii) clarify the treatment of RECs under the contractual scheme of VPPAs. Accordingly, OTC platforms now have the additional objective of facilitating transactions between buyers and sellers in respect of contracts related to VPPAs and RECs, among others.
This note analyzes the draft amendments with reference to VPPAs.

On May 22, 2025, India’s Central Electricity Regulatory Commission released draft guidelines for virtual power purchase agreements (“VPPAs”), further to an opinion from theSecurities and Exchange Board of India on regulatory jurisdiction. Unlike a ‘physical’ power purchase agreement, which involves the actual delivery of electricity, a VPPA is essentially a bespoke financial contract to hedge against market volatility and other risks. Pursuant to the draft guidelines,the difference between the VPPAprice and the market price will be settled bilaterally between the contractingparties.
In the United States and elsewhere, VPPAs have appealed to a wide variety of corporate buyers, including to meet renewable energy (“RE”) targets, improve sustainability performance and branding, andsecure long-term certainty on electricitycosts and RE intermittency.
While the draft guidelines specify that VPPAs will be non-tradable and non-transferable, the RE involved in a VPPA will be eligible for RE certificate (“REC”) issuances. If the RE generator sells electricity through power exchanges or other authorized modes, it may directly transfer the RECs received to an eligible consumer. Such consumer, in turn, can use such RECs for compliance or green attribute claims.
However, existing regulations on RECs do notprovide for the sale of ‘bundled’ certificates, where RECs can be sold together with their associated RE. This limitation may impact verifiability and ESG claims. The draft guidelines suggest that, apart from statutory certificates issued under REC regulations, no other environmental attribute certificate (“EAC”) may be transferred in a VPPA, potentially compromising the commercial viability of such arrangements.
Global trends indicate that VPPAs need not always include EAC transfers. However, the draft guidelines make REC transfers mandatory in VPPAs. Although transferred RECs can be used for meeting RE consumption targets, they cannot be traded. This may restrict consumers from entering into VPPAs for capacities not supported by RECs.