VPPAs Could Help Meet A Quarter Of India’s 2030 Target of Renewable Energy

The recently released WWF-India’s report “Virtual Power Purchase Agreement (VPPA) for C&I consumers in India” highlights that the total estimated demand for VPPAs in India by 2030 could be as high as 104 GW, which could help to meet 27% of the remaining target of India’s 500 GW target by 2030. 

The VPPAs offer many strategic advantages that allow them to address current gaps in the market without disrupting the existing relationship with DISCOMS for procurement. This report not only describes the benefits offered by VPPAs in India but also puts forward suggestions on the specific roles of stakeholders and suggests a path forward that would enable the implementation of VPPAs in India. 

Virtual PPA’s are different from regular PPA’s in that the Virtual PPA buyer does not actually offtake any energy from a renewable project. Here the buyer agrees to purchase a project’s renewable energy for a pre-agreed price. In this agreement, the utility-scale solar project receives the market price at the time the energy is sold.

If the market price is greater than the fixed VPPA price, the offtaker/buyer receives the difference.

If the market price is less than the fixed VPPA price, the offtaker/buyer pays the project to make up the difference.

In this way, a Virtual PPA acts as a financial hedge against volatile electricity prices. The buyer might receive the project’s Renewable Attributes, or Renewable Energy Certificates (RECs). Because there is no physical delivery of power, the VPPA is a great option for large electricity consumers with a fragmented/distributed electric load to support  the development of new renewable energy resources.

“We are aware that more than 50% electricity consumption comes from commercial & industrial segment. It is our endeavor to put in our best efforts and emphasis on the possible mechanisms to provide a conducive atmosphere to commercial and industrial consumers to go for more RE. The report will come handy to the consumers and policymakers to take the initiative of enhancing the renewable electricity mix from the C&I segment into the Indian electricity grid”, said Dinesh Jagdale, Joint Secretary, Ministry of New & Renewable Energy (MNRE).  

India’s previous target of 20 GW for solar energy by 2022 was rapidly scaled up five fold to 100 GW. Furthermore, recently the country has accelerated its 2030 RE target from 450 GW to 500 GW by 2030 in addition to achieving Net Zero by 2070.   

However, if India consummates the renewable goals, there is a need to build large scale Renewable Energy. Virtual power purchase agreements (VPPAs) have emerged as a popular tool for corporate groups to increase the share of renewable procurement significantly in a short period of time. Large corporate groups like Microsoft, Google, and Amazon have successfully used this model to meet their renewable targets internationally.