DOE unveils draft rules for virtual power purchase deals

The Department of Energy (DOE) has issued a draft circular outlining rules for Virtual Power Purchase Agreements (VPPAs) to expand renewable energy financing.

The measure seeks to strengthen the market for renewable energy certificates (RECs) and advance the Philippines’ clean energy goals.

Under the draft guidelines, a VPPA is defined as “a private contract for the sale of Voluntary RECs, without regard to the physical delivery of electricity to the Buyer.”

These contracts will enable renewable energy developers to secure guaranteed payments from businesses and industries in exchange for RECs.

Buyers, in turn, can use these agreements to meet voluntary sustainability commitments such as RE100 membership and net-zero pledges.

The DOE stressed that VPPAs will be treated as valid power purchase agreements for financing purposes.

“Considering the direct correlation of Voluntary RECs to the power generated, the guaranteed payment by the Buyer for every Voluntary REC attributed to the Seller may serve as a financial guarantee,” the draft states.

Only renewable energy facilities producing Voluntary RECs will be eligible for VPPA participation.

Plants supplying distribution utilities or other entities for Renewable Portfolio Standards (RPS) compliance will not qualify.

The rules clarify that VPPAs are strictly financial instruments, with no requirement for physical electricity delivery to buyers.

All power generated under VPPA projects must still be traded through the Wholesale Electricity Spot Market (WESM) or other DOE- and Energy Regulatory Commission (ERC)-regulated platforms.

Each VPPA contract will carry a minimum term of 10 years.

Transactions under the mechanism will not require DOE or ERC approval unless specifically mandated.

The DOE said the policy will help accelerate the National Renewable Energy Program’s targets of achieving a 35% renewable energy share in the power mix by 2030 and 50% by 2040.

The draft circular is now open for public comments from stakeholders.