CERC floats draft rules for virtual PPAs for better RE consumption obligation

The Central Electricity Regulatory Commission (CERC) has floated draft guidelines for virtual power purchase agreements (VPPAs), an innovative financial structure, that can aid enterprises in planning long-term Renewable Energy Consumption Obligation (RCO).

In March, the Power Ministry requested CERC to devise a suitable regulatory framework for VPPAs as a non-transferable specific delivery-based Over the Counter contract (OTC) for facilitating RCO compliance by regulated entities.

Stakeholders can share their responses by June 20. The regulator defined VPPA as an NTSD-based OTC contract entered between a designated consumer and RE generator. The designated consumer guarantees payment of the mutually agreed price (VPPA price) to the RE generator for the agreement’s duration.

The RE generator shall sell electricity through power exchange or any other mode authorised under the Electricity Act, and the difference between VPPA price and market price will be settled bilaterally between the contracting parties as per mutually agreed terms.

The VPPA price is the rate of electricity as mutually agreed between a consumer or a designated consumer and an RE generator, either directly or through a trader or by listing on an OTC Platform.

Suddhasatta Kundu, Director of Power Sector Advisory at Nangia & Co, told businessline: “VPPAs will enhance investment for RE generation by providing a predictable revenue stream for RE generators, making projects more bankable.”

Besides, they can help large Indian companies with significant exports and global presence to reduce the embedded emissions of their products. This, in turn, leads to a reduction in the number of CBAM certificates required, translating into direct cost savings, he added.

Publication – The Hindu Businessline

By Suddhasatta Kundu