India's 45 GW Renewable Energy Projects Face PPA Hurdles Amid Power Surplus and Demand Slowdown
Senior officials from the Ministry of New and Renewable Energy have revealed that renewable energy implementing agencies are encountering significant challenges in facilitating power purchase agreements for 45 gigawatts of green energy projects that have already secured transmission connectivity. This substantial capacity, crucial for India's ambitious renewable energy targets, remains in limbo due to multiple systemic factors affecting the power sector.
Key Factors Behind the PPA Gridlock
The primary reasons for this impasse include relatively slow growth projections for electricity demand in 2025–26, surplus power availability during peak solar hours leading to weakened demand, and assured power availability for distribution companies anticipated after 2028–29. These market conditions have created an environment where renewable energy projects face unprecedented challenges in securing the necessary purchase agreements to move forward.
Several developers have approached the Central Electricity Regulatory Commission seeking resolution, prompting the regulatory body to solicit comments from various stakeholders including developers, industry associations, renewable energy implementing agencies, and government representatives. The CERC has circulated a staff proposal specifically addressing cases where transmission connectivity has been allocated but power purchase agreements face significant delays.
Developers Face Substantial Risks and Challenges
Renewable energy developers have expressed serious concerns about facing potential revocation of their allocated connectivity and encashment of bank guarantees for circumstances they argue are beyond their reasonable control. As India progresses toward its target of 500 gigawatts of renewable energy capacity by 2030, officials acknowledge that project execution delays and transmission bottlenecks have emerged as critical obstacles to achieving this ambitious goal.
While numerous developers have successfully obtained letters of award and secured essential grid connectivity, the absence of finalized power purchase agreements has prevented them from meeting crucial financial closure timelines. This situation has resulted in transmission assets either remaining idle after commissioning or operating significantly underutilized—an economically inefficient outcome that imposes substantial costs on the entire power system infrastructure.
Government Response and Ongoing Initiatives
Senior MNRE officials have noted some positive developments, indicating that pending bids for power purchase agreements have experienced gradual offtake, with agreements for 10.5 gigawatts signed by renewable energy implementing agencies over the past twelve months. Government schemes including PM-Surya Ghar and PM-KUSUM have enabled distribution companies to free up power in specific segments for other consumers, contributing to a slight reduction in demand for utility-scale renewable energy projects.
"All renewable energy implementing agencies are actively evaluating the feasibility of pending bids," explained a ministry official. "The government has been engaging consistently with state governments to ensure compliance with renewable purchase obligations while simultaneously exploring opportunities for increased renewable energy consumption by commercial and industrial users, green hydrogen manufacturers, and emerging data center facilities."
Addressing the Supply-Demand Imbalance
Industry sources indicate that the current backlog of power purchase agreements stems primarily from a surplus of renewable energy bids relative to actual demand from distribution companies. This imbalance has prompted discussions about potential solutions, including suggestions that renewable energy implementing agencies should temporarily pause inviting new bids until existing pending power purchase agreements are successfully signed.
Additional proposals have emerged suggesting that instead of issuing generic tenders, implementing agencies should invite state-specific bids that align more closely with actual demand projections or firm commitments from individual states. This targeted approach could potentially address the mismatch between renewable energy supply and regional electricity demand more effectively.
Regulatory Proposals and Industry Concerns
Another government official emphasized that authorities are working diligently to develop solutions that do not disadvantage either project developers or transmission utilities. "Comprehensive discussions are underway with all relevant stakeholders, while the Central Electricity Regulatory Commission has been tasked with developing an appropriate mechanism to address these challenges," the official stated. "The Ministry of Power has additionally constituted a committee of senior officials to recommend practical solutions to this complex situation."
Recognizing that transmission connectivity represents a scarce and valuable resource, the CERC has suggested in its staff paper that connectivity should be allocated exclusively to committed players capable of executing projects according to established timelines. The regulatory commission has proposed several approaches for cases involving delayed signing of purchase agreements, including:
- Allowing developers to reset project milestones by offering land as a guarantee
- Permitting substitution of project developers
- Enabling complete exit options that would allow vacant connectivity to be reallocated through auction processes
The commission has further suggested that all future connectivity allocations should be conducted through auction mechanisms to ensure optimal utilization of transmission resources.
Industry Opposition to Auction Models
Most industry stakeholders have expressed strong opposition to proposed auction models, characterizing them as potentially anti-competitive and likely to inflate electricity tariffs. Instead, developers and industry representatives have advocated for more realistic timelines for achieving commercial operation and financial closure, supported by binding lender term sheets and provisions for phased project commissioning.
Vaibhav Pratap Singh, Executive Director at Climate and Sustainability Initiative, highlighted that this situation is evolving into a significant planning challenge for India's power sector. "Re-auctioning connectivity might appear administratively clean, but numerous bids were originally placed under the assumption that projects would proceed with firm power purchase agreements," Singh explained. "A sudden reset of these arrangements risks unsettling investor confidence at a critical juncture for India's renewable energy transition."
"Achieving the ambitious 2030 renewable energy targets will require better alignment between grid access availability, financing certainty, and appropriate risk allocation for developers," Singh added. "A balanced approach incorporating time-bound exits with reasonable penalties, provisions for project transfers, and mechanisms to free up capacity for serious players is essential to maintain renewable energy momentum on track."
The ongoing challenges facing India's renewable energy sector highlight the complex interplay between infrastructure development, market dynamics, and regulatory frameworks as the country advances toward its clean energy objectives. As stakeholders continue discussions and explore potential solutions, the resolution of these power purchase agreement delays will significantly influence India's progress in achieving its renewable energy ambitions while ensuring grid stability and economic efficiency.
