India's green ambitions at risk: ISTS charge waiver expiry threatens renewable projects
India’s renewable energy sector now faces a defining moment. In a significant, albeit partial, reprieve last fortnight, the government extended the waiver of interstate transmission system (ISTS) charges for new hydro pumped storage projects (PSPs) and co-located battery energy storage systems (BESS) until 30 June 2028.
This milestone-based concession for energy storage projects recognises that certain clean energy investments need policy support beyond the current deadline. But it also throws into sharp relief a glaring question: what about solar and wind power, the main pillars of India’s green energy ambitions?
“We highlighted the challenges faced by developers in commissioning projects due to uncontrollable factors such as force majeure events, government delays, and transmission delays. These conditions were already acknowledged in the Ministry’s Order dated 9 June 2023, as valid grounds for case-specific ISTS waiver extensions. In our humble opinion, delays due to government actions or transmission delay should qualify for automatic extensions without the need for case-by-case evaluation. This clarification would significantly improve the ease of doing business and reduce the burden on developers in seeking case-to-case extension for common issues,” states National Solar Energy Federation of India’s (NSEFI) letter.
As things stand, the crucial ISTS charge waiver for solar and wind projects is set to expire on 30 June 2025 – a looming cutoff that threatens to upend investments in renewable investments and derail India’s 2030 clean energy targets.
NSEFI’s appeal for ISTS waivers for enhancing grid utilisation by hybridisation of single technology RE projects and/or addition of Energy Storage Systems (BESS) continues: “To further align with the Ministry’s goals of promoting hybrid energy systems and improving utilisation of grid assets, we propose that the ISTS waiver be extended to renewable energy projects which under-take hybridisation (ie adding alternate RE technology or Energy Storage System with a standalone solar/wind project). We request a three-year extension of the ISTS waiver until 30 June 2028 for hybrid projects (solar, wind, and BESS), commissioned in this timeframe to address the following challenges associated with hybridisation.”
“Despite declining global prices, BESS installation remains costly in India, standalone BESS costs for two-hour discharge currently range from Rs5.5–Rs6.5/kWh. Also, many solar sites, especially in Rajasthan, are low in wind resource. The newer Wind Turbine Generators (WTGs) can operate even at lower wind speeds, however due to the lower CUFs, the cost of power generation will exceed Rs5/unit. For adding battery or alternate RE technology, the cost of production will increase; however, granting ISTS waiver could improve affordability of offtake for discom/industries and encourage adoption,” points out NSEFI.
To those outside the energy sector, the ISTS charge waiver might sound like arcane policy jargon. In reality, it has been a quiet catalyst of India’s renewable energy boom. First introduced in 2016 and later expanded, the waiver exempts eligible solar and wind projects from paying transmission fees for sending power across state lines. This incentive was designed to unlock India’s vast renewable potential by allowing solar- and wind-rich states (like Rajasthan and Gujarat) to supply inexpensive green power to distant demand centres without an extra cost penalty. In effect, the policy knitted the country’s best renewable resources to its power-hungry industrial hubs, making clean energy competitive with or cheaper than coal-fired electricity.
The results have been remarkable. Since 2020, roughly a quarter of all new utility-scale renewable energy capacity has been built on the interstate grid, leveraging the ISTS waiver to deliver power wherever needed. By cutting transmission charges to zero, the government materially reduced delivered renewable power prices – to the tune of an estimated Rs0.70–0.80 per kWh savings in delivered cost. This hidden discount kept solar and wind tariffs in India among the lowest in the world, enabling developers to bid aggressively in auctions and sign affordable open-access contracts.
Perhaps most importantly, the waiver democratised access to clean energy. It allowed power-deficit states and thousands of Commercial & Industrial (C&I) consumers to tap into cheap renewable energy generated elsewhere. Large corporates and factories – which account for nearly half of India’s electricity use – could contract solar or wind from a remote project and have it delivered via the interstate grid without prohibitive fees, something that was critical to the open access renewable market. By one account, C&I users make up about 40 per cent of India’s installed renewables capacity today, yet only 9 per cent of their electricity demand is met through renewables procured directly (open access or captive). The ISTS waiver has been instrumental in bridging this gap, incentivising industries to source green power from resource-rich regions to lower their carbon footprint and energy bills.
Pipeline at risk
If the ISTS waiver ends, as scheduled, in 2025, the shock to India’s renewable sec-tor could be severe. Developers of solar and wind projects have been banking on this incentive for business viability – in many cases, it was a make-or-break assumption when bidding for projects or signing power agreements. Industry estimates indicate that nearly R5 lakh crore worth of renewable energy projects would be adversely impacted if the waiver is not extended.
The vulnerability is not abstract; it is visible on the ground. Consider Rajasthan, India’s solar powerhouse. The state has the largest installed solar capacity, and an even larger pipeline under development. About 10 GW of new solar projects in Rajasthan – representing roughly Rs48,500 crore in investment – are currently stalled due to a legal and regulatory quagmire. These projects, which had been progressing in the desert state’s sun-drenched Great Indian Bustard habitat, hit a roadblock when a wildlife conservation lawsuit halted new transmission lines in the area. They cannot connect to the grid until courts resolve the ‘Great Indian Bustard (GIB) case’ and authorities grant approval under Section 68 of the Electricity Act for their transmission lines.
These Rajasthan solar projects – and many others like them – face a double whammy: they are unable to finish on time due to bureaucratic and legal delays, and now risk losing a financial incentive that was integral to their viability.
It’s not just Rajasthan. Across India, a large number of renewable projects awarded in recent years are racing against the clock to meet the mid-2025 commissioning deadline for the waiver. It is estimated that over 80 GW of renewable capacity in various stages of development could be jeopardised by the re-imposition of ISTS charges. This is because once ISTS charges kick in, the cost for buyers (whether state utilities or corporate off-takers) will increase, potentially making previously agreed renewable tariffs unviable.
The domino effect of such a scenario cannot be overstated. Project cancellations would mean sunk costs for developers and investors, layoffs in construction, and lost opportunities for associated manufacturing (solar modules, wind turbines, etc.). Crucially, it would dent confidence in the sector – both among domestic entrepreneurs and foreign investors who have so far seen India as a stable, growth-oriented clean energy market. If the rules of the game change mid-way, capital will think twice before committing to India’s ambitious renewable plans.
India has repeatedly affirmed its commitment to achieving 500 GW of non-fossil fuel electricity capacity by 2030. This is a cornerstone of its climate pledge and a signal of leadership on the global stage. It includes expansive targets for solar, wind, hydro, and nuclear power, and is roughly equivalent to half of India’s projected total capacity by 2030. The progress to date has been impressive: as of early 2025, India had over 220 GW of renewable capacity installed, up from just 50 GW a decade ago.
Achieving 500 GW, however, requires maintaining an aggressive installation rate of around 40-50 GW of new renewable capacity every year till 2030. Any slowdown now could knock India off this trajectory and make the 2030 goal increasingly difficult to attain.
The ISTS waiver has been a key policy lever for keeping renewable capacity additions on track with these lofty goals. By assuring developers that they can sell power across India without transmission penalties, it effectively enlarges the market for each new project and improves the odds that capacity will find a buyer and get built. Removing this incentive two-thirds of the way to 2030 would be akin to pulling out a support pillar from India’s clean energy edifice.
The government’s recent decision to extend the waiver for hydro storage and BESS projects is an acknowledgment of this logic. It sets a precedent for milestone-based extensions: only projects that are awarded or commissioned by a certain date (June 2028 in that case) and likely meeting other conditions, get the benefit.
Industry representatives, including the National Solar Energy Federation of India (NSEFI), have proposed a similar milestone-based extension for solar and wind – for example, granting the ISTS waiver to all renewable projects that were in the pipeline by mid-2023 and achieve commissioning by, say, June 2026 or 2027. This would effectively cover projects that are already well underway and were expected to meet the original deadline but are facing delays beyond the developers’ control.
From a climate commitment stand-point, delaying or downsizing renewable installations now would have ripple effects. Every gigawatt not built on time makes the 500 GW goal steeper, and could force greater reliance on fossil fuel capacity in the interim. Moreover, India’s credibility in the international arena – at forums like the G20 and COP28 – is bolstered by policies that back its promises. Extending the ISTS waiver through the end of the decade would send a strong signal that India is serious about its energy transition and is willing to take pragmatic steps to ensure success. By contrast, letting the waiver lapse abruptly could be read as a retreat or complacency in policy support, at odds with the country’s visionary targets.
Protecting India’s industrial competitiveness
Beyond the energy and climate com-munity, India’s industrial sector has a huge stake in the fate of the ISTS waiver. The reason is simple: cost of power is a decisive factor in manufacturing competitiveness, and Indian industry pays some of the highest electricity tariffs in the world. C&I consumers account for around 40-45 per cent of India’s electricity consumption. Unlike many countries that offer subsidised power to industries, India’s industrial tariffs are elevated – averaging roughly R11 per unit (Rs11/kWh) for large consumers, compared to about Rs7.5 per unit in China. This 50 per cent cost disadvantage is a significant drag on India’s ‘Make in India’ and ‘Atmanirbhar Bharat’ aspirations, especially for energy-intensive sectors like steel, cement, chemicals, and textiles.
The ISTS waiver has acted as a critical pressure valve for these high tariffs. It enabled companies to procure cheaper renewable energy from out-of-state projects, avoiding both the hefty markups of local discoms and additional open access surcharges (like cross-subsidy and transmission surcharges) that are normally levied on direct power purchases.
If the waiver is withdrawn, those savings shrink or vanish. Starting July 2025, transmission charges of Rs1-2 per unit will start to apply, adding directly to the cost of renewable power for C&I users. By July 2028, a full 100 per cent of ISTS charges will be reinstated. For an industrial consumer, that means paying potentially 20-30 per cent more for the same solar or wind power, eroding the economic incentive to shift to clean energy. The timing could not be worse. Global supply chains are in flux, with many companies looking at India as a manufacturing alternative under the ‘China + 1’ strategy.
Moreover, from 2026 onwards, exporters to markets like the EU will face the Carbon Border Adjustment Mechanism (CBAM) – essentially a tariff on carbon-intensive goods. Indian steel, aluminium, cement, and other exports will need to demonstrate lower embedded emissions or else pay a carbon penalty. Here again, affordable clean energy is the only real route to compliance. The ISTS waiver has been pivotal in giving Indian manufacturers a fighting chance to decarbonise affordably. If it’s removed now, Indian firms might then be forced to rely on costlier alternatives or buy offsets – adding expense just when they need to remain competitive abroad.
To be clear, the cost of extending the waiver to support industry is minimal. C&I consumers utilising ISTS-based renewable power currently make up less than 2 per cent of the total national grid load. The socialised cost of the waiver – spread across all other electricity users – is estimated at only Rs0.04 (4 paise) per unit of electricity.
Even if one considers the overall transmission charge pool, the incremental impact of continuing the waiver is around Rs300-Rs400 crore per year, which is less than 0.7 per cent of annual transmission costs. In short, the bang for the buck is enormous.
“The renewable energy sector today faces a critical threat: the impending expiry of the waiver on ISTS charges. This waiver is set to lapse at the end of June. Without timely policy intervention to extend it, many renewable energy projects could face significant delays, heightened uncertainty, and financing risks, putting investments worth nearly Rs5 lakh crore at stake. This could potentially hinder India’s clean energy transition. The ISTS, a national high-voltage transmission network, plays a vital role in facilitating the flow of electricity between states and is crucial for integrating power generated from large scale renewable energy projects. States like Punjab and Haryana have limited capacity for clean energy generation. Several developers have set up utility scale solar parks in states like Rajasthan and Guja-rat. The ISTS charge waiver has been instrumental in making these projects operational and viable. As India overtakes Japan to become the fourth-largest global economy and moves ambitiously toward surpassing Germany, it is essential that our policies remain clear and consistent to boost capital investment. There is every reason to believe this clarity will soon extend to the renewable energy sector as well,” says Dhanendra Kumar, Former IAS officer, Deputy Secretary Irrigation and Power (Govt of Haryana) and Chairman, CCI.
Policy delays and the targeted extension
It is important to understand why so many renewable projects are facing delays, and why missing the ISTS waiver deadline is often not the developers’ fault. The reality is that building large-scale solar and wind projects in India has become increasingly challenging due to external bottlenecks – what might be called policy and regulatory force majeure. For one, securing the necessary approvals to connect projects to the grid has been a slow and convoluted process. Multiple renewable projects that applied for grid connectivity well before the cut-off date (30 June 2023) were only granted effective connectivity dates in 2026 or 2027. This effectively pushes their commissioning beyond the waiver deadline, through no shortcoming of their own.
The Ministry of Power did respond: in June 2023, it issued a framework to extend ISTS waiver eligibility for projects facing force majeure delays such as these. More recently, in May 2024, the Ministry wrote to the regulators (CERC and CTU), directing that any renewable projects which had applied by the mid-2023 deadline and are delayed due to transmission infrastructure not being ready by June 2025 should still be granted the 100 per cent ISTS charge waiver. The policy intent to not penalise developers for government-related or force majeure delays is clearly present – but the implementation has lagged. As of mid-2025, that directive has not been codified into CERC regulations or formal orders, leaving developers in a state of uncertainty.
Despite these headwinds, many developers have shown extraordinary commitment and faith in India’s renewable mission. They have sunk costs into land, achieved financial closure (with loans and equity tied up), and even ordered equipment such as turbines and solar modules well in advance. These steps were taken with the reasonable expectation that policy incentives (like the ISTS waiver) and timelines would hold.
This is why industry associations are calling for a targeted extension – not an indefinite freebie, but a reasonable accommodation for specific delayed projects. The National Solar Energy Federation of India (NSEFI), which represents solar developers nationwide, has formally appealed to the Prime Minister’s Office for a one-year extension of the ISTS waiver (to 30 June 2026) for projects meeting milestone criteria. In their letter, they propose that any solar or wind project that applied for ISTS connectivity by 30 June 2023, and achieved key development milestones – such as land acquisition of at least 50 per cent, financial closure, and the placing of major equipment orders – should be given an extra year to commission and still avail of the waiver.
Notably, the NSEFI’s plea aligns with the spirit of the government’s own recent actions. The Ministry of Power’s milestone-based waiver extension for PSP and BESS projects (granted just this month) acknowledges that certain projects need more time due to long lead times and pending approvals. Solar and wind developers are asking for comparable consideration.
As the deadline draws near, the case for extending the ISTS charge waiver for solar and wind projects is crystal clear. The waiver has delivered exactly as intended: it jump-started renewable growth, slashed energy costs, and propelled India forward in the clean energy race. With such a track record, ending it abruptly now – when dozens of gigawatts are in the pipeline – would be akin to pulling the plug on India’s green future just as it is gaining momentum.
“One of the smartest and most consequential policy enablers for the renewable energy sector has been the waiver of Inter-State Transmission System (ISTS) charges. This waiver allowed renewable projects to use the national grid without paying transmission fees, without directly costing the government anything. More than the financial relief, this move sent a powerful signal: it has de-risked investments, encouraged demand from energy-intensive industries, and made green power the preferred choice for distribution companies. There have been record-breaking capacity additions and a booming open-access market for commercial and industrial (C&I) consumers,” says Shriram Subramanian, Founder, InGovern Research Services.
However, this progress is now under threat. The ISTS waiver is scheduled to expire on 30 June, 2025. Extending the ISTS waiver for at least three more years, especially for C&I-oriented projects, is not about giving handouts.
Conversely, failing to extend the waiver could have far-reaching negative consequences: higher electricity costs for industry, loss of global competitiveness, missed climate targets, and a chilling effect on green infrastructure investment. The talk in boardrooms and investor circles would shift from India’s spectacular renewable auctions to the sudden policy U-turn that made projects unviable. That is the kind of uncertainty emerging markets can ill afford if they wish to attract capital at scale.
India’s leadership – from the Prime Minister’s Office to the Ministries of Power and New & Renewable Energy – has shown great foresight in championing renewables thus far. They rightly tout India’s achievements: over 220 GW of renewables, some of the world’s cheapest solar power, and ambitious capacity addition plans. To cement these gains, policy consistency is key.
The bottom line is that the clock is ticking, but it is not too late to act. By extending the ISTS waiver for solar and wind projects that have played by the rules, India can keep its renewable revolution on track. This is not about giving handouts – it is about keeping the charge on for a brighter, cleaner, and more prosperous future. The nation’s green energy lifeline must not be cut short. It must be extended, strengthened, and allowed to finish the job it set out to do.