MNRE Launches 500 MW Pilot Program to Stabilise Revenue for RE Developers

Ministry of New and Renewable Energy has rolled out a pilot Contract for Difference framework aimed at strengthening renewable energy supply beyond solar hours and improving market-linked procurement mechanisms. 

Scheme Structure and Capacity Details 

As per news reports, the pilot scheme covers 500 MW of renewable energy capacity, with developers required to supply 1,500 MWh of electricity daily during non-solar periods. Developers can choose any three-hour window for delivery based on operational flexibility. 

Solar Energy Corporation of India has been appointed as the implementing agency. Projects under the scheme will follow a build-own-operate model and will be backed by contracts spanning 12 years. 

The pricing will be determined through a reverse bidding process, where a strike price is discovered. Under the CfD mechanism, if market prices fall below this level, the government compensates developers, while any excess above the strike price is returned by the developers. 

Allocation Limits and Financial Mechanism 

To ensure wider participation, no single bidder can be allocated more than 125 MW, equivalent to 375 MWh. A stabilisation fund of ₹76 crore has been created to manage financial settlements, including pay-ins and pay-outs under the CfD arrangement.  

Developers will also be required to participate in a structured market sequence, beginning with the Green Day-Ahead Market, followed by the Day-Ahead Market, and finally the real-time market for any remaining electricity. 

Policy Intent and Industry Perspective 

Renewable Energy Minister Pralhad Joshi stated that the initiative aims to provide revenue certainty, improve market stability, and enhance investor confidence. 

Industry experts highlighted the financial challenges associated with renewable energy projects operating during non-solar hours.  

Market Impact and Structural Shift 

The scheme is expected to reduce investment risks without imposing long-term procurement obligations on distribution companies.  

It also introduces flexibility into the system and reflects a gradual transition away from traditional 25-year fixed-price power purchase agreements towards market-based mechanisms. 

The pilot also addresses a key imbalance in the energy system. While solar generation peaks during the day, demand tends to rise in the evening and early morning.  

Currently, this gap is largely filled by thermal power at higher costs, as renewable sources struggle to compete once storage costs are included. 

Global Context and Future Outlook 

Contract for Difference mechanisms have been successfully implemented in countries such as the UK and Spain.  

In the Indian context, this pilot could serve as a transitional model between long-term fixed tariff arrangements and fully market-driven renewable projects, particularly for peak-hour supply. 

Over time, as costs decline and market participation increases, especially from commercial and industrial consumers, the model may evolve into a more commercially sustainable framework. 

Read More: World Bank’s IFC to Double India Investments to $10 Billion by 2030, Focus on Infra and Energy! 

Conclusion 

The CfD pilot represents a shift in India’s renewable energy policy, combining market-based pricing with revenue assurance to support non-solar power supply and encourage investment in flexible generation capacity. 

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