The Department of Energy (DOE) has released a draft circular introducing guidelines on Virtual Power Purchase Agreements (VPPAs), a new mechanism aimed at expanding the market for renewable energy certificates (RECs) and supporting the country’s clean energy targets.

Under the draft rules, 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 allow renewable energy (RE) developers to secure guaranteed payments from businesses and industries in exchange for RECs, providing developers with a new financing avenue while enabling buyers to align with voluntary sustainability goals such as RE100 and net-zero commitments.

The DOE emphasized that VPPAs will be recognized as valid power purchase agreements for funding 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 projects generating Voluntary RECs will qualify as VPPA projects. RE facilities used by distribution utilities or other mandated participants for Renewable Portfolio Standards (RPS) compliance will be excluded from eligibility.

The draft circular clarifies that VPPAs are strictly financial contracts, with no obligation for sellers to deliver electricity directly to buyers. Power generated under VPPA projects must still be traded through the Wholesale Electricity Spot Market (WESM) or other DOE- and ERC-regulated platforms. Each agreement will run for at least ten years, and transactions will not be subject to DOE or ERC review unless otherwise specified.

The DOE noted that introducing VPPAs will help accelerate the National Renewable Energy Program’s goal of achieving a 35% renewable energy share in the generation mix by 2030 and 50% by 2040.

The draft circular is now open for comments from stakeholders.

What do you think of the DOE’s proposal to allow Virtual Power Purchase Agreements? Could this open new financing pathways for RE projects, or will it complicate REC trading in the Philippines? We’d like to hear your thoughts. 

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