India’s clean energy transition is advancing at an unprecedented pace. Having built an enormous base of solar and wind power, the country now stands at a crossroads. The next decade of India’s green journey will be defined not merely by gigawatts of capacity added, but by the transition to complex, integrated energy ecosystems. Firm and Dispatchable Renewable Energy (FDRE) and round-the-clock (RTC) projects will drive growth over this decade.
As the grid gears up for ever-greater shares of intermittent renewables, clean energy companies in India need to address new infrastructure constraints, redefine market frameworks and scale up investment into advanced grid technologies in order to unlock this next phase of growth. The sector needs a fundamental shift from ‘generate-when-available’ energy to ‘firm, dispatch-when-required’ clean energy.
Operational Excellence: Forecasting, DSM and AI
Achieving this shift requires rigorous compliance with the CERC Deviation Settlement Mechanism (DSM) Regulations 2024, which mandate precise grid adherence. Updated forecasting and scheduling regulations serve as critical regulatory drivers, penalising deviations and pushing utilities toward predictive operations. Concurrently, the wider adoption of Artificial Intelligence (AI) in forecasting, scheduling, and asset management provides the data-driven precision required to achieve operational excellence under these tighter frameworks.
The Grid Bottleneck: A Major Roadblock
The increased number of new renewable energy projects has highlighted a critical disconnect: grid-infrastructure phasing is not aligned with capacity-addition timeline. Renewable energy projects, such as large scale solar and wind farms may be developed and constructed within 12-18 months. However, the development of the inter-state transmission system (ISTS) lines required to deliver the generated power to consumers generally takes about 3-5 years to develop and construct. As such, there exists a major bottleneck, which results in approximately 50 GW of ready or commissioned renewable energy capacity being left “stranded” due to lack of access to timely grid connections, based upon information collected by the Institute for Energy Economics and Financial Analysis (IEEFA).
Balancing the Financial Burden: Rewriting RE Financial Frameworks
An integrated clean energy system cannot be achieved in isolation from a strong financial and regulatory environment. There are currently issues with the distribution of financial risks associated with delays in projects. The provision of the Reserve Bank of India (Prudential Framework for Project Finance) Directions, 2025; Section 14 (Chapter IV) related to Date of Commencement of Commercial Operations (DCCO) extension; states that when the total amount of additional financing required for cost overruns reaches the regulatory limit of 10% of the initial project cost, then any further interest during construction (IDC) created due to regulatory and transmission delays shall be funded solely by the promoters/independent power producers (IPP).
The September 2025 rationalisation that decreased the GST on renewable energy equipment from 12% to 5% is a very positive move. But the cost increases in project CapEx should be distributed equally among off-takers, transmission companies, and regulators. Systemic changes, such as a two-part tariff for renewables (which separates the fixed cost of capacity from the variable cost of energy) and having the sale of green power fall under one GST system with clear input tax credits for developers will allow clean energy companies in India to reduce costs.
Rewarding Flexibility: Dynamic Markets and Co-Location
For India to maximise the benefit of large-scale energy storage, it will be necessary for India’s power markets to provide incentives for flexible operation. There are three key elements to make this happen:
- Deepening real-time electricity markets to enable true price discovery.
- The introduction of Time-of-Use (ToU) pricing for both power generation and procurement will provide an incentive for increased electricity production during periods of highest demand, in addition to the consumer-side ToU mandates already in place via the Electricity (Rights of Consumers) Amendment Rules, 2023.
- Ancillary Service Markets being developed for equitable compensation of assets providing grid stability, frequency regulation, and fast-ramping reserves.
In addition to having a focus on cost reduction, the industry must also rapidly implement Virtual Power Purchase Agreements (VPPAs) based on the recently released CERC VPPA Guidelines in December 2025, and scale-up the Carbon Credit Trading Scheme (CCTS) that was notified.
The use of frameworks from a policy standpoint will help make it easier to place renewable energy and storage assets together. There are three major gaps that need to be closed in order to transform individual power plants into flexible, operational elements of a larger, integrated system. These gaps include the need to expedite approval of grid connections, simplify the permit process for hybrid plants, and create formalised tariff structures for multi-technology projects.
Powering Peak Demand: Storage Mandates and Green Banks
A ‘clean grid’ is only effective if it can deliver power when needed and transmit that power to where it is required. In addition to being able to generate enough power to satisfy customer demands, a clean grid must also possess sufficient storage capabilities and efficient transmission lines. The Ministry of Power and the Central Electricity Authority (CEA) have suggested that co-located storage with renewable energy projects is necessary to provide power during periods of high demand. However, in order to make these recommendations a reality, there must be changes made at both the policy and financing levels.
These storage mandates must become official policies. Clean energy sources must have specific peak supply standards. The rules of the wholesale electricity market must be amended to allow storage assets to enter into and compete equally with other participants for the provision of peak hour supply and frequency regulation services.
On the financial side of things, expanding the VPPA program is going to be an important driver. Corporate offtake agreements (VPPA) provide banks with long-term revenue guarantees, and therefore protection against market fluctuations. Additionally, there are other types of support needed within the industry, such as:
- Specialised Green Banks: Building upon the foundational role of specialised financiers such as the Indian Renewable Energy Development Agency (IREDA), create dedicated green banks with larger balance sheets to support the financing of very large-scale, multi-technology RE ecosystems.
- Government-Backed Loss Guarantees: Risk-mitigation mechanisms designed to protect developers from increased IDC costs due to regulatory delays and/or Central Transmission Utility of India Limited (CTUIL) network delay issues. This protection can take the form of either direct fiscal support or a market-based insurance product.
The Path Forward
India’s transition to clean energy is now far past the initial phase. If India is able to align the timeline for expanding the transmission system with the timeline for adding new generation capacity; if India rewrites the market regulations so that flexibility in the grid is rewarded; and if India de-risks the investments made in the clean energy sector by creating a smart, fair framework for financing the projects, India will create an incredibly robust, intelligent, and highly-integrated clean energy system that can supply the power necessary to drive India’s economy forward.
At JAKSON Green, our IPP portfolio of hybrid and FDRE projects is built for exactly this integrated future. Explore our tailored clean energy solutions.
| Disclaimer: The information provided in this blog is for general informational purposes only and not professional advice. Jakson Green Limited bears no responsibility for errors, omissions or the accuracy of the information provided. |
