Introduction to Virtual Power Purchase Agreements (VPPA)
India's power market regulator has introduced a new framework for Virtual Power Purchase Agreements (VPPA), which provides large electricity consumers a route to meet their renewable energy obligations without physical power delivery.
Key Features of VPPA
- Non-physical Route: Allows compliance with renewable energy obligations without physical delivery of green power.
- Contract Nature: Non-tradable, non-transferable bilateral contracts with renewable generators for at least one year.
- Flexibility for Consumers:
- Continue sourcing physical power from existing arrangements like discoms or captive generation.
- Scope for aggregating demand across regions.
- Assured Revenue for Generators: Supports renewable generators with assured revenue streams.
- Financial Linkage: Allows a financial agreement between consumers and renewable generators, different from conventional physical power procurement.
Mechanism and Settlement Structure
- Bilateral Contract: Long-term agreement at a mutually agreed price between the renewable energy generator and the consumer.
- Power Exchange Sales: Generators continue selling electricity on the power exchange as conventional.
- Market Price Settlement:
- If market price exceeds PPA price, the difference benefits the consumer.
- If market price is below PPA price, the consumer compensates the generator for the shortfall.
- Risk and Reward: Market risks and rewards are effectively transferred to the consumer, ensuring fixed realization for the generator over the contract period.
Target Consumers
- Large commercial and industrial consumers.
- Data center operators.
- Global technology firms.
