By Abbas Nazil
Renewable energy producers in India have urged government to extend the waiver on inter-state transmission system (ISTS) charges for green power projects until 2030 to support the country’s clean energy transition.
The waiver, currently set to expire on June 30, 2025, plays a crucial role in reducing the cost of renewable power generation and ensuring its competitiveness against conventional sources like coal.
During a consultative meeting chaired by Minister for New and Renewable Energy Pralhad Joshi on February 5, industry bodies such as the Wind Independent Power Producers Association (WIPPA) and other stakeholders raised concerns regarding the potential impact of removing the waiver.
They emphasized that without the extension, tariffs on renewable energy would rise significantly, making it less attractive for investors and power distribution companies (DISCOMs). The added costs could also discourage industries from transitioning to cleaner energy sources.
Presently, ISTS charges are waived for 25 years for solar, wind, hybrid, battery storage, and pump storage projects commissioned before June 30, 2025.
This waiver allows developers to avoid transmission costs ranging from Rs 0.4 to Rs 1.8 per unit, a substantial component of total tariffs.
Without this financial relief, the cost burden would shift to developers and DISCOMs, potentially derailing India’s renewable energy targets.
According to industry representatives, failure to extend the waiver could jeopardize many Letters of Award (LOAs) from converting into Power Purchase Agreements (PPAs), which would slow down project implementation.
As it stands, DISCOMs have approximately 40 GW of pending PPAs that could be finalized if the waiver remains, potentially saving them 60-90 paise per unit in procurement costs.
The cost of extending the waiver is relatively low compared to its benefits. Official data estimates that transmission charges without the waiver amount to Rs 52,691 crore per year, whereas the ISTS waiver accounts for only around Rs 3,602 crore annually—just 7 percent of total transmission costs.
This modest expense, industry players argue, yields significant long-term advantages, including boosting investor confidence and accelerating the shift toward the government’s 500 GW renewable energy target.
Government officials from the Ministry of New and Renewable Energy (MNRE) and the Ministry of Power are expected to deliberate soon on whether to approve the extension.
Meanwhile, transmission constraints remain a challenge in achieving renewable energy goals. While Madhya Pradesh is projected to have spare transmission capacity, states like Rajasthan and Gujarat are expected to face limitations, underscoring the need for careful planning in power procurement.
Industry leaders have also highlighted delays in closing LOAs with PPAs as a significant concern, leading to liabilities for developers.
The government is working on new guidelines to ensure these agreements are finalized within a year.
While some suggest a phased reduction in ISTS waivers to balance cost-sharing, industry experts warn that this approach could deter PPAs from materializing due to increased renewable energy procurement costs.