Stricter Renewable Energy Rules May Slow India’s Green Transition, Warn Industry Experts
India’s plan to tighten regulations for renewable energy producers could pose challenges to its ambitious clean energy targets, according to industry groups and analysts.
The new rules, proposed by the Central Electricity Regulatory Commission (CERC) in September 2025, are intended to make renewable energy suppliers more accountable for maintaining grid discipline. However, experts warn that these changes could hurt developer earnings, delay new projects, and dampen investor confidence in the sector.
Tighter Deviation Norms Ahead
At the core of the proposed framework is a revision to the Deviation Settlement Mechanism (DSM) — the system that penalises power producers when their actual generation deviates from scheduled supply.
Currently, renewable power producers such as solar and wind companies enjoy a broader margin for error due to the natural variability of their energy sources. But under the new proposal, starting April 2026, this margin will gradually shrink each year until 2031, when renewable plants will be treated on par with conventional energy producers like coal and gas.
According to the CERC, the goal is to improve forecasting accuracy and ensure greater grid stability as India’s share of green power continues to grow. The country aims to double its non-fossil fuel capacity to 500 gigawatts (GW) by 2030.
Industry Sounds Alarm on Financial Impact
While the intent is to enhance reliability, renewable developers warn that the proposed changes could have unintended financial consequences.
In a letter to the regulator reviewed by Reuters, the Wind Independent Power Producers Association (WIPPA) said the rules could lead to “severe financial losses,” particularly for older projects built under more flexible norms.
“These penalties could cause huge losses, especially for older projects that were built under different rules,” WIPPA stated.
The association estimates that some wind projects could face revenue losses of up to 48% if the new deviation formula is implemented. WIPPA has already challenged last year’s DSM regulations in court, arguing that such penalties would make wind projects financially unviable.
Solar Developers Raise Red Flags
The National Solar Energy Federation of India (NSEFI) echoed similar concerns, warning that the rules could undermine project economics and discourage investment in upcoming solar tenders.
Unlike thermal plants, solar and wind farms rely heavily on weather-dependent generation, making perfect forecasting nearly impossible. Although technological improvements can reduce forecasting errors, experts say uncertainty can never be fully eliminated.
“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.
Balancing Growth with Grid Reliability
India has made remarkable strides in renewable energy adoption, becoming one of the world’s fastest-growing solar and wind markets. However, the rising share of renewables in the power mix has heightened concerns over grid reliability and demand-supply fluctuations.
The CERC’s proposed framework aims to strike a balance — pushing renewable producers to improve accuracy while ensuring a stable and reliable power grid.
Experts, however, caution that a one-size-fits-all approach could risk slowing investment momentum at a crucial time for India’s clean energy transition.
If the norms are enforced without flexibility, they warn, India’s renewable pipeline could face delays — potentially impacting its goal of reducing fossil fuel dependency and achieving net-zero emissions by 2070.
