Renewable energy investors are increasingly shifting towards operating and near-commissioned projects after changes in grid connectivity rules made it harder to transfer ownership of early-stage assets, analysts said, altering deal structures and valuation trends in the sector.
Analysts said acquisitions of ready-to-build (RTB) assets have slowed after the norms came into force last year, with operating assets and projects nearing commercial operations attracting valuation premiums as connectivity-related risks are largely resolved.
The norms, which became effective on August 31 last year, require the original applicant to retain a majority stake in projects with grid connectivity until two years after the commercial operation date (COD). The move was aimed at curbing speculative trading of grid access.
The changes have “significantly shifted the valuation and timing of renewable M&A transactions”, said Kaushlendra Tripathi, partner-energy and resources at Grant Thornton Bharat.
“There has been a noticeable slowdown in acquisition of ready-to-build assets after the norms came into force,” Tripathi said.
Speculative Grid Banking
Previously, projects with secured land and connectivity approvals were among the most sought-after targets in the M&A market as buyers could acquire them early and accelerate capacity addition. However, restrictions on transfer of connectivity before COD have increased risks around such transactions, consultants said.
“We are seeing a flight to quality. Operating assets or those very close to COD are commanding higher valuation premiums because they have de-risked connectivity,” Tripathi said.
The changes come even as renewable deal activity remains strong overall. Deal value in the renewable energy sector rose more than five-fold to $2 billion in 2025 from $378 million in 2024, according to multinational law firm Fieldfisher. Analysts, however, said the increase masks changing investor preferences within the market.
The rules were introduced to address growing instances of connectivity banking, where developers secured connectivity ahead of project progress and subsequently monetised those positions through sale of project special purpose vehicles (SPVs) or development platforms. The government aims to achieve 500 GW of non-fossil fuel power capacity by 2030.
Capital Compression
Sambitosh Mohapatra, partner, resource transformation and sustainability transformation at PwC India, said acquirers would increasingly need to buy entire project SPVs after commissioning rather than acquire connectivity-linked assets at earlier stages.
“This will push deal timing later in the project lifecycle,” Mohapatra said.
He added that smaller independent power producers (IPPs), which relied on monetising connectivity-linked assets to fund future development, could face liquidity pressure, potentially resulting in consolidation or distressed sales.
However, some industry executives said the impact may be less severe for genuine developers as transaction structures could evolve. A chief financial officer at a power company said developers can retain majority ownership before COD and alter shareholding structures after commissioning, allowing deals to proceed through alternate routes.