India's tougher grid rules unsettle investors, test clean energy ambitions

FE Team | Published: June 07, 2026 23:07:29

NEW DELHI, June 4 (Reuters): India's push to tighten power grid discipline is colliding with its clean energy ambitions as tougher rules for solar and wind projects alarm investors, who warn the requirements could slash returns and impede investment needed for the energy transition.
The most-feared regulations, due to take effect in April 2027, sharply increase penalties when renewable power producers fail to deliver electricity matching their commitments to the grid, according to industry executives, investor presentations and documents reviewed.
Industry groups estimate the tougher regime could cut revenue by about 11 per cent for solar projects and as much as 48 per cent for wind farms, fuelling concerns that India could make renewable investments less attractive just as it seeks billions of dollars to expand clean energy capacity.
India's federal power regulator has said the tougher framework is needed to protect grid stability as renewable capacity expands rapidly.
The dispute over the new rules underscores the challenge of integrating growing volumes of renewable power into India's grid while preserving investor confidence as the country seeks to meet its clean energy target of installing 500 gigawatts of non-fossil fuel capacity by 2030.
As of March, India had 288 GW of non-fossil fuel capacity, with wind and solar accounting for 73 per cent of the total.
Under the revised rules, penalties rise according to the gap between scheduled and actual power supplied to the grid.
"Developers will face very high penalties even when deviations are small. This tightens margins, revenues will shrink and project viability will be affected," said Debabrat Ghosh, India head at energy consultancy Aurora Energy Research.
Investors and developers generally eye at least a 10 per cent internal rate of return (IRR) for solar projects, and at least 12 per cent to 13 per cent for hybrid projects combining solar and wind, analysts and industry executives said.
Aurora expects the new rules will reduce IRRs by 1.5 percentage points for wind projects and by 1.2 percentage points for hybrid projects.