India proposes virtual energy agreements to boost renewable power trading in power markets

India's power regulator proposed Tuesday amending its trading rules for electricity to introduce Virtual Power Purchase Agreements (VPPA), a financial instrument aimed at assisting consumers to meet their renewable energy obligations and exchange power.

The Central Electricity Regulatory Commission (CERC) draft proposal formally recognises VPPAs, as OTC contracts that will assist large industrial buyers to meet clean energy goals without taking delivery.

A VPPA is a mechanism that allows a customer to negotiate a price with a renewable generator who will then sell the electricity on the open market.

The two parties will settle the difference in price between the VPPA agreed price and the market price.

Ember analysts warned early this month that while the VPPAs provide a way for large consumers of renewable energy to meet their obligations, they could become a compliance tool, allowing consumers to claim 100% renewable use.

Last week, the National Stock Exchange of India and Multi Commodity Exchange of India announced they would launch power derivative contracts.

The draft regulation proposes also to strengthen CERC's power to inspect and audit OTC platforms and Power Exchanges.

The CERC is seeking public comment on the draft regulation until the 14th of July before finalizing it. Sethuraman NR, Vijay Kishore (Editing and Reporting)

(source: Reuters)