India’s move to tighten rules for renewable energy producers could slow the country’s clean energy growth and hurt investor sentiment, reported news agency Reuters.
The proposed regulations, introduced by the Central Electricity Regulatory Commission (CERC) in September 2025, aim to make renewable power suppliers more accountable for maintaining grid discipline. However, industry bodies have warned that these changes could squeeze company earnings and delay new investments in wind and solar projects.
Under the draft proposal, the CERC has sought to revise the Deviation Settlement Mechanism (DSM) — the framework that determines penalties when actual power generation differs from scheduled supply.
Currently, renewable producers such as wind and solar generators are allowed a wider margin for deviation due to the unpredictable nature of their energy sources. But from April 2026, the regulator plans to gradually narrow this margin every year until 2031, when renewable plants will be treated at par with conventional power producers like coal and gas.
The objective, according to the CERC, is to improve forecasting and scheduling accuracy among renewable energy producers and ensure better stability in India’s electricity grid as the share of green power continues to rise.
India currently aims to double its non-fossil fuel-based capacity to 500 gigawatts by 2030 as part of its clean energy transition goals.
INDUSTRY WARNS OF LOSSES AND INVESTMENT RISKS
While the government’s intent is to strengthen grid reliability, renewable energy producers argue that the rules could unintentionally hurt the sector’s growth.
In a letter to the CERC reviewed by Reuters, the Wind Independent Power Producers Association (WIPPA) said that the new regulations could result in heavy financial losses for developers, especially older wind projects that were built under more flexible rules.
“These penalties could cause huge losses, especially for older projects that were built under different rules,” the association stated.
According to WIPPA’s estimates, some wind projects could see revenue losses of up to 48% if the new deviation formula is implemented as proposed.
The group has already challenged last year’s deviation regulations in court, claiming that such penalties would create uncertainty and make wind projects financially unviable.
SOLAR DEVELOPERS ALSO RAISE CONCERNS
The National Solar Energy Federation of India (NSEFI) has also raised red flags about the proposed rules. In its letter to the CERC, the industry body said the new norms could undermine project economics and discourage investors from participating in future solar tenders.
Unlike thermal plants, renewable energy projects are highly dependent on weather patterns, which makes accurate forecasting difficult. Solar developers believe that while improved forecasting tools can reduce deviation, it is not possible to eliminate uncertainty completely.
“The rules, if implemented in their current form, could put financial pressure on existing projects and make new bids less competitive,” NSEFI wrote in its submission to the regulator.
BALANCING RENEWABLE EXPANSION WITH GRID STABILITY
India has made impressive progress in scaling up renewable energy, emerging as one of the largest markets for solar and wind power globally. However, as renewables now contribute a growing share of the total power mix, grid stability has become a key concern for policymakers.
The CERC’s proposal seeks to ensure that renewable energy companies forecast generation more accurately, preventing sudden fluctuations that can disrupt electricity supply.
Experts say the regulator faces the challenge of balancing two competing priorities — maintaining grid stability and ensuring financial sustainability for renewable developers.
If implemented without adjustments, the rules could slow down India’s renewable energy pipeline and affect its goal of reducing dependence on fossil fuels.
– Ends
