The Ministry of New and Renewable Energy (MNRE) has approved a pilot Contracts for Difference (CfD) program for renewable energy, with the Solar Energy Corporation of India (SECI) designated as the nodal agency.

Under the approved framework, SECI will issue a tender for 500 MW of renewable energy capacity to supply 1,500 MWh of power during three non-solar hours each day. The specific hours may be defined within a designated time band by SECI, allowing developers operational flexibility.

The projects will be implemented on a build-own-operate basis, with a contract tenure of 12 years.

Developers will be selected through a competitive reverse bidding process, with a cap of 125 MW per bidder to ensure broader participation.

The CfD mechanism will enable renewable energy generators to sell electricity on power exchanges, while SECI will settle the difference between a competitively discovered strike price and the prevailing market clearing price. This structure is designed to provide revenue certainty to developers while retaining market-based price discovery.

Settlements will be benchmarked to zonal day-ahead market (DAM) prices, and the bidding sequence will follow a structured order beginning with the Green Day-Ahead Market (GDAM), followed by DAM, and subsequently the Real-Time Market (RTM).

To support the settlement framework, the government has created a ₹760 million (~$8.12 million) stabilization fund for pay-ins and pay-outs. The profits and losses will be shared daily between the renewable energy generator and the CfD pool in a 30:70 ratio, with monthly reconciliation.

If the pool turns zero or negative at any point during the 12-year tenure, SECI must replenish it from its own resources, while the Government of India’s outgo under the framework will remain limited to ₹760 million (~$8.12 million).

Revenue from the sale of renewable energy certificates tied to power sold in DAM or RTM must also be deposited into the CfD pool. SECI may retain up to 25% of profits credited to the pool, after deduction of the generator’s share, to meet operational expenses, although a two-year moratorium will apply before such withdrawals begin.

Upon completion of the 12-year contract period, developers may continue to sell power in the open market without CfD support, or enter into power purchase agreements or bilateral arrangements, subject to applicable regulations.

The pilot aims to test the financial, operational, and regulatory viability of CfDs in India’s evolving power market, providing a potential pathway for scaling market-based renewable energy procurement mechanisms in the future.

Recently, SECI invited quotations from scheduled commercial banks to invest ₹4.5 billion (~$49.603 million) in term/fixed deposits.

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