India’s green energy vision needs policy stability

India’s promise as a clean energy hub, with net zero target by year 2070, depends on affordable, accessible green power.

India’s rise as one of the world’s top four economies is tightly bound to the strength and sustainability of its power sector. While fossil fuels remain a core pillar, renewable energy (RE) holds the key to meeting the energy needs of a fast-growing economy and delivering on ambitious climate commitments of achieving net zero by year 2070. The journey so far has been impressive: India’s installed RE capacity crossed 220 GW as of March 2025.

What sets India’s renewable energy story apart is that it has flourished largely without the scale of direct fiscal support seen in sectors like roads, railways, or aviation. Annual budget speeches rarely announce big outlays for renewables. Yet, driven by falling technology costs, policy consistency, and investor appetite, the sector has grown on its own strength—competing head-on with conventional power.

Waiving transmission charges was a game changer

One of the smartest and most consequential policy enablers has been the waiver of Inter-State Transmission System (ISTS) charges. This waiver allowed renewable projects to use the national grid without paying transmission fees, without directly costing the government anything. The costs were socially distributed—similar to waiving tolls for EVs while raising them slightly for fuel-based vehicles. More than the financial relief, this move sent a powerful signal: it has de-risked investments, encouraged demand from energy-intensive industries, and made green power the preferred choice for distribution companies.

The impact has been transformative. There have been record-breaking capacity additions, a booming open-access market for commercial and industrial (C&I) consumers, and sustained investor confidence. Since its inception in 2016, the ISTS waiver has been critical in enabling C&I consumers to buy affordable clean power across state borders. It helped reduce industrial carbon intensity and improved the global competitiveness of Indian exports, particularly in sectors sensitive to energy cost and carbon footprint.

Environment right now for RE is not helpful

However, this progress is now under threat. The ISTS waiver is scheduled to expire on June 30, 2025. Projects commissioned after this date will start facing transmission charges, 25% in the first year, gradually increasing to 100% by July 2028. This comes at a time when the sector is already facing a barrage of regulatory and judicial challenges.

In January 2025, the Karnataka High Court struck down the Green Energy Open Access Rules, 2022 (GEOA Rules), a key driver of the C&I market, on grounds of jurisdiction. Meanwhile, the Central Electricity Regulatory Commission recently rejected tariffs for SECI’s first battery storage project due to delays and market price movements, highlighting the need for more regulatory nimbleness. Delays in transmission approvals—such as those under Section 68 of the Electricity Act—often caused by litigation, continue to create bottlenecks. Removing the ISTS waiver now, amid these headwinds, sends a confused and discouraging message to developers. It threatens over $100 billion worth of projects in the pipeline that are central to achieving India’s 2030 goal of 500 GW in renewable capacity.

C&I power buyers will bear the brunt. Higher transmission costs could make green energy procurement uneconomical, especially for projects already under development. For projects that applied for grid connectivity before June 30, 2023, and have achieved financial closure, land acquisition, and equipment orders—but are unable to commission by June 30, 2025 due to government or grid delays—the retroactive cost could push them into financial distress or abandonment.

Fiscal impact of sticking to status quo is negligible

And yet, the fiscal impact of continuing the waiver is modest. Estimates peg the cost at less than Rs.0.04 per kWh—a small price for continued investment, job creation, rural upliftment, and emissions reduction. The waiver also supports a more resilient and flexible grid by enabling clean energy flow from surplus to deficit regions. The Ministry of Power has shown flexibility by extending ISTS waivers for pumped hydro and co-located battery energy storage systems (BESS), based on milestone achievements. A similar, milestone-based extension for under-construction solar and wind projects with valid connectivity and procurement commitments would be equitable and consistent.

The C&I segment deserves special attention. These consumers, who already pay the highest tariffs and subsidize other categories, also hold the key to India’s decarbonization ambitions. They consume nearly half the electricity in the country, yet only a small portion of that comes from renewables. Scaling up green power use in this segment is critical—not just for climate goals, but for maintaining the global competitiveness of Indian industry. Supporting battery storage and pumped hydro is a welcome step. But unless policy continues to actively enable RE procurement—especially for C&I consumers—the broader goals of clean growth will remain elusive.

Extending the ISTS waiver for at least three more years, especially for C&I-oriented projects, is not about giving handouts. It is about strategic foresight. In a world moving toward low-carbon manufacturing, energy cost and carbon footprint are no longer just operating metrics—they are competitive advantages. India’s promise as a clean energy hub, with net zero target by year 2070, depends on affordable, accessible green power. Removing the waiver now is like charging EVs a toll just when they are about to scale. India’s renewable sector has shown that it can grow without crutches. But taking away a foundational pillar like the ISTS waiver—just when the sector needs stability—could slow the country’s green energy momentum, which is running strong. Let’s not put a speed bump in its path.