South and Southeast Asia, the Next Frontier of cPPAs

11 minute read | February.16.2023

Corporate power purchase agreements (cPPAs) have seen exponential growth in the Southeast Asia region over the last year. This has largely been on account of increased corporate and governmental decarbonisation targets, rising costs of liquefied natural gas, coal and oil, the relatively decreasing costs of renewable energy and, importantly, the effective implementation of regulations in this sector.

Wood Mackenzie reported in November 2022 that corporates in Asia Pacific were set to contract a record 7 GW in 2022, an 80% increase compared to 2021.[1] We have also seen an increasing number of clients reaching out for assistance on preparing and negotiating cPPAs for projects in South and Southeast Asian jurisdictions such as India, Malaysia, Singapore and Indonesia, predominantly in the solar and (onshore) wind sectors.

A cPPA is an agreement under which a corporate buyer purchases renewable energy (usually together with renewable energy credits and/or carbon offsets) directly from a renewable energy developer/power generator, either through a physical transaction or a “virtual” financial swap.

The South and Southeast Asian Story

While the market for cPPAs is robust and well-developed in the United States and in many parts of Europe, the cPPA is a relatively new concept in South and Southeast Asia. Traditionally, corporates in most South and Southeast Asian jurisdictions were not permitted to procure electricity directly from power generators. In many jurisdictions, state-owned entities had (and in some cases, continue to have) a monopoly over the transmission, distribution, wholesale and retail of power. Power purchase agreements (PPAs) were agreements entered into by state-owned utilities with the generators. Corporates, in turn, procured power from the state-owned utilities, typically on standard terms imposed by the utilities (with little room for negotiation or making changes).


Recent changes in legislation and regulatory frameworks have enabled cPPAs to take off in India. The (Indian) Electricity Act, which came into force in 2003, marked the beginning of the opening up of Indian’s power sector to a more competitive system. Traditionally, Indian state-owned and licensed distribution companies were the main offtakers of power in India, which relied largely on fossil fuel. However, given the Indian government’s commitment to renewable energy and ambitious climate goals under the Paris Agreement, India enacted regulations such as The Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules in June 2022 along with the renewable energy certificate regime which strongly incentivises corporates to go green. India is today one of the leading cPPA countries in the region, with 8.1 GW of cumulative contracted capacity.[2]


Since 2020 until as recently as May 2022, Vietnam has passed legislation and released a number of proposals for a pilot direct PPA scheme, which would open up Vietnam’s electricity market for the first time. Under this scheme, renewable energy generators would be able to directly sell electricity to private offtakers under virtual or synthetic PPAs (which are essentially contracts for differences) (vPPAs).[3] No sale of physical electricity from a generator to a corporate offtaker will be permitted under this direct PPA scheme. Instead, the corporate offtaker and generator would agree on a contract price and a contracted capacity, and the corporate offtaker would continue to purchase power from Electricity Vietnam at the retail spot price, and the generator will continue to sell power to Electricity Vietnam at the wholesale spot price. As between the corporate offtaker and generator, they will then settle between themselves the difference between the two prices.


Interestingly, while Vietnam seems to be starting with the introduction of vPPAs as their first step to an open, competitive electricity sector, in other jurisdictions, vPPAs are viewed with caution and are only just recently opening up to such a concept.

In Malaysia, direct PPAs between consumers and solar power producers (who installed and operated solar PVs on the consumers’ premises) have been permitted since 2016 under the Net Energy Metering Scheme. vPPAs, however, were not in the cards for Malaysia until November 2022 when the Malaysian government announced a new Corporate Green Power Programme that would allow corporate customers to enter into vPPAs with power producers for green electricity supply (up to an initial total quota of 600MW). The programme is still open for bid submissions; the current deadline is set at 20 March 2023.

Other Drivers

In addition to the evolution of legislation and regulatory frameworks becoming more suitable for cPPAs, the growth in cPPAs in South and Southeast Asia can also be attributed to other factors, including:

  • the ability of cPPAs to provide certainty and reliability that the energy procured is from a clean source—this is important for corporates who are keen to meet their sustainability commitments and pledges. Notably, almost two-thirds of new RE100 membership in 2022 come from Asia[4]; and
  • the decrease in costs of electricity for utility-scale solar, commercial solar and onshore wind, made more stark when compared to the recent increases in the prices of coal, crude oil and liquefied natural gas.

Issues to Consider in cPPAs

As can be seen from our discussion above, legislation and regulations across South and Southeast Asia are evolving, complex and not uniform. There is no common accepted standard amongst developers and corporate buyers in all South and Southeast Asian jurisdictions. cPPAs that are entered into for projects in this region reflect the financial credibility, sophistication and negotiating power of the specific parties involved.

We examine below some of the key commercial and legal issues that developers and corporate buyers may wish to consider when negotiating cPPAs in South and Southeast Asia.


  • Change in Law Risk

    Given that cPPAs are often long-term contracts and there may be a long lead time before a project becomes operational and offtake under the cPPA commences, the risk of a change in law is not an improbable nor insignificant one. The COVID-19 pandemic is a prime example of how laws (affecting renewable projects) can change quickly. During the pandemic, many South and Southeast Asian countries put in place (sometimes almost overnight) interim laws and measures to seek to alleviate the difficulties caused by the pandemic. Such changes could affect both the original economics and timeline for commissioning of the project as envisaged by the developer. A cPPA should thus always address the possibility of a change in law and provide for a proper allocation of such risk between the parties.

  • Project Financing and Bankability

    Renewable energy projects typically require a large amount of capital to construct and take a long time to become commercially operational (and able to generate a steady flow of income). It is important for a developer to be able to raise financing for the project (instead of tying up its own capital).

    The appetite of a lender to extend project financing depends on, amongst other things, whether it is able to get comfortable that the project is bankable. The cPPA represents the key source of revenue of the project and is directly related to the ability of the developer to repay its debt to the lenders. The developer will thus need to ensure that the terms of the cPPA are bankable and will provide lenders with the comfort they need. This creates some difficulty in South and Southeast Asian projects especially. Local developers may not be aware of (or may find it difficult to meet) the bankability standards typically expected by international lenders, which are generally quite different from that of a local lender.

  • Land Risk

    A key risk in developing renewable energy projects in South and Southeast Asian projects is land risk. Certain jurisdictions, such as India, do not have a fully digitalised, comprehensive land registry system, and it may be difficult or impossible to determine if all requisite land and access rights have been obtained. Land in India is also usually split into separate parcels, each owned by a different person, and land acquisition could be lengthy and complex and lead to higher development costs.

    In jurisdictions such as Singapore, land is scarce and availability of land to deploy the project is a challenge. Rooftops are commonly used in Singapore for solar panel projects, and it would be key to ensure that the appropriate access and leasehold rights are obtained from the relevant lessors/head lessors. Land is also capable of being compulsorily acquired, and property developments may become subject to “en bloc” or collective sales.  

    A cPPA should provide sufficient buffer in terms of timelines and an ability to extend timelines where required, to minimise the developer’s exposure to the corporate buyer in the event of delays in the development process. The possibility (and consequences) of land rights being removed or withdrawn during the life of the cPPA should also be addressed in a cPPA.

Corporate Buyers

  • RECs

    One of the key drivers for corporate buyers to enter into cPPAs is often to obtain the necessary renewable energy credits, energy attribute certificates, carbon offsets and/or other credits (RECs) to meet its sustainability and net-zero commitments. A corporate buyer should thus require the developer to provide sufficient assurance in the cPPA that the project is, in fact, able to create such RECs and any certificates or guarantees of origin required for the corporate buyer to complete its necessary reporting obligations.

    Depending on the applicable legal and regulatory regime and how the project is structured, it may be possible that no RECs are permitted to be created as a matter of local law. For example, the Indian CERC (Terms and Conditions for Renewable Energy Certificates for Renewable Energy Generation) Regulations, 2022 prescribe various conditions that must be met in order for a project in India to be eligible for or to avail RECs. Such conditions differ depending on whether the project is a renewable energy generating plant or a captive generating plant. Failure to meet such requirements could result in a corporate buyer not receiving any RECs in respect of the renewable energy it is procuring under the cPPA.

    A cPPA would thus usually contain obligations on the developer around the creation, registration, accreditation, verification, tracking and delivery of such RECs and such certificates or guarantees of origin. Different regimes apply across different jurisdictions, and corporate buyers should satisfy themselves on these matters before entering into a cPPA.

  • Delay and Underperformance

    The corporate buyer would have entered into the cPPA in order to meet certain of its power demands, and it would want certainty as to when it will be able to commence offtake of power. If the project is delayed in achieving commercial operation, this may have repercussions on the corporate buyer’s operations and business case. Delay liquidated damages (LDs) are thus usually imposed on the developer to incentivise the developer to complete the project on time and compensate the buyer for potential losses due to such delay.

    A corporate buyer should also consider imposing minimum generation obligations on the developer to ensure that the project is able to generate enough energy to meet the corporate buyer’s needs. If the developer fails to generate the requisite quantity, performance LDs could be imposed. Where the project is not yet operational, the difficulty in this regard would be how to determine what this quantity would be.

  • Early Termination Right

    Corporate buyers would usually wish to retain the flexibility of an early exit from a cPPA without having to provide any reason or show any cause. cPPAs could extend for long periods of time, and the market and the corporate buyer’s situation could change (sometimes drastically) during that time. The cPPA would typically require the corporate buyer to pay a termination fee to the developer in such situation. In most cases, we see this fee being computed based on the amount of revenue that the developer would have derived from the cPPA if the corporate buyer had not exercised its right to terminate early.

    Developers would sometimes require the corporate buyer to be locked in for a fixed period of time in order to satisfy the concerns of project lenders before the buyer is able to terminate the cPPA for convenience. In our experience, South and Southeast Asian corporate buyers are generally more willing to agree to a longer termination notice period in lieu of a shorter (or no) lock-in period.


As (1) the worldwide trend towards net-zero commitments proliferate and (2) the legal and regulatory regimes and industry players in South and Southeast Asia continue to develop and learn from the European and North American experience, there is tremendous potential for significant growth in cPPAs in this region moving forward.

There is a wide range of legal and commercial issues that will need to be considered in preparing and negotiating cPPAs – the above is only the tip of the iceberg. For more information, please do not hesitate to reach out to any member of the Orrick Team listed below.