India advances power market reforms with VPPAs and market coupling

The Central Electricity Regulatory Commission (CERC) issued final guidelines in December 2025 that formally recognise virtual power purchase agreements (VPPAs) as bilateral, non‑tradable financial contracts with a minimum one‑year tenor. VPPAs allow commercial and industrial (C&I) consumers to secure renewable energy certificates and price certainty without physical power delivery, addressing a growing off‑take gap – about 42 GW of the 93 GW renewable capacity tendered since FY 2023‑24 remains without buyers. The framework is intended to help India meet its renewable consumption obligation targets as electricity demand is projected to rise from 1,929 BU in 2026‑27 to 3,365 BU by 2035‑36.

Separately, CERC appointed Grid Controller of India Ltd (GRID‑India) as the market‑coupling operator to aggregate bids across the Indian Energy Exchange, Power Exchange India Limited and Hindustan Power Exchange. Market coupling will create a single clearing price, improve liquidity, and provide uniform price signals essential for renewable integration and optimal transmission use. India’s short‑term electricity market has grown from about 66 BU in FY 2010 to nearly 240 BU in FY 2025, yet only 7‑8 % of total generation trades on exchanges, underscoring the need for deeper market participation. These reforms aim to enhance competition, reduce transaction costs, and support the country’s transition to a cleaner grid.