By Dhanendra Kumar

As India rapidly climbs the global economic ladder, overtaking Japan to fourth position, its ambitious goal of attaining 500 gigawatt (Gw) renewable energy (RE) capacity by 2030 stands as a critical pillar in its economic growth as well as climate leadership. However, goals in the renewable sector face significant challenges. A case in point is the looming expiry of the Inter-State Transmission System (ISTS) charge waiver. We have already arrived at the point when the waiver expires. There are uncertainties in financial projections, jeopardising nearly `5 lakh crore in investments and potentially stalling India’s rapid clean energy ascendance.

The ISTS is the national high-voltage transmission network that facilitates the movement of electricity across states, crucial for integrating power generated from large-scale RE projects. Traditionally, using this network incurs ISTS charges — fees for transmission and losses during transfer ultimately borne by the consumer.

Recognising the need to accelerate clean energy development, the ministry of new and renewable energy introduced waivers exempting eligible RE projects —commissioned before June 30, 2025 — from these charges. This policy has helped in making renewable power competitive. It enables commercial and industrial consumers to procure green energy via open access or operate captive plants more economically while strengthening Make in India by lowering the entry barrier for manufacturers seeking affordable and clean power.

However, the phased expiry of this waiver on June 30 poses hurdles to the sector’s growth. July onwards, developers will start paying 25% of ISTS charges, increasing each year by 25%. Beginning July 2028, these charges will have to be paid by developers in their entirety.

The industry is already facing formidable challenges. Critical projects have been stalled by prolonged litigation raising environmental concerns, specifically related to the conservation of the Great Indian Bustard. Approval delays from bodies like the Central Electricity Authority and connectivity operationalisation delays from the Central Transmission Utility of India have compounded issues. Numerous RE developers who applied for connectivity in early 2023 received operationalisation dates beyond the ISTS waiver deadline, jeopardising their projects’ economic feasibility.

Without the waiver, the sector faces stark roadblocks — tariffs may surge, affecting RE competitiveness. This could hamper India’s industrial decarbonisation and compromise the global competitiveness of its exports, particularly in sectors where energy costs and carbon intensity are critical factors.

There could be several practical solutions to this problem. The foremost is a milestone-based ISTS waiver extension beyond June. This approach may include projects that have achieved specific development milestones — such as applying for connectivity by June 2023, financial closure by June 2024, acquisition of at least half the required land, and confirmed equipment orders — and may automatically qualify for an extended waiver period until June 2026.

Further, the government may consider automatic extensions for projects delayed by transmission issues or force majeure events without necessitating cumbersome case-by-case evaluations. A clearly defined extension policy may streamline approvals and enhance investor confidence, thereby reducing bureaucratic overhead.

Additionally, extending ISTS waivers to hybrid RE projects integrating battery energy storage systems could bolster grid stability and utilisation, promoting dispatchable and firm renewable energy. This hybridisation may be useful to address intermittency concerns and ensure robust grid integration of renewable sources.

It is also important that the incremental financial impact of these proposed extensions on the national transmission pool is modest. According to recent industry analysis, the cost of extending the waiver is projected to be merely 4 paise per unit, which translates to only 0.61% of the total cost of power supply. This modest investment could unlock substantial economic and environmental dividends — as it would facilitate the addition of approximately 40 Gw of RE capacity over the next two years — further strengthening India’s global leadership in RE adoption.

The government has previously acknowledged the need for further waiving this charge for projects delayed by force majeure or transmission provider issues. Extending the ISTS waiver with clear, milestone-based criteria would help attain India’s non-fossil fuel capacity target by 2030. It would help safeguard committed investments, ensure continued RE growth, and align with India’s ambitious energy and climate goals. A timely government intervention to address these systemic delays will help sustain investor confidence and enable quicker financial closures.

India has already achieved worldwide respect for its stellar achievements in solar, wind, hydrogen, and hybrid projects as well as for marching ahead with sustained momentum. It is important that all the hurdles are effectively taken care of so that the momentum is not lost or slowed and the ambitious 2030 targets are met.

The writer is Chairman, Competition Advisory Services India LLP.

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