India’s green power pipeline had become clogged. A mega clean-up is on cards.

The ministry has asked Solar Energy Corp. of India (SECI), NTPC Ltd, NHPC Ltd and SJVN Ltd to cancel awarded contracts by November end in cases where it’s not feasible to sign power purchase agreements (PPAs) and power supply agreements (PSAs), according to two people aware of the development and a document reviewed by Mint.

These state-run firms, referred to as the Renewable Energy Implementing Agencies (REIA), are intermediaries in the renewable energy chain, signing PPAs with project developers on one end, and PSAs with power distribution companies (discoms) on the other. However, many discoms have chosen to wait for lower tariffs rather than sign PSAs straightaway, holding up the whole process.

A power ministry meeting on 17 October chaired by secretary Pankaj Agarwal decided to cancel the contracts, the people cited above said on the condition of anonymity.

“REIAs to close the legacy bids and close the LOAs (letter of awards) by 30th November 2025 in cases where signing of PPA/PSA is not feasible. Alternatively, REIAs may sign the PPAs themselves without PSA,” the minutes of the meeting showed. “REIAs informed that due to low demand from states, especially for solar capacity, difficulties are faced in signing PPAs.”

Out of the 93 gigawatts (GW) awarded by these state-run firms since the beginning of FY24, 42GW involving a proposed investment of around ₹2.1 trillion still do not have PPAs and PSAs in place, putting these contracts in limbo. The figure had reached a high of 55GW in November last year.

The decision, aimed at resolving the vexed issue that has plagued the sector for years, assumes importance given the impact of delays on India’s ambitious green energy targets. The cancellation will also help free up the transmission capacity that has been locked by these contracts. The decision also comes in the backdrop of Power Grid Corp.’s Central Transmission Utility of India Ltd cancelling grid connectivity for around 17GW of delayed renewable energy projects.

India has an installed renewable energy capacity of 245GW, of which solar and wind power account for 116GW and 52GW, respectively. India plans to add 50GW of green energy capacity annually to reach 500GW by 2030. Given the nation’s green energy transition trajectory and the net-zero target by 2070, the plan is to add 1,800 GW of renewable energy capacity by 2047 and 5,000GW by 2070.

“There has been low demand from states. This cancellation of awards will also help in freeing up transmission capacity,” one of the two people cited above said.

These REIAs have also been given the option to sign the PPAs without a PSA. It was also decided that the “green shoe option” that had allowed additional capacity to be procured over and above the tendered capacity at the same bid price will be dropped.

Analysts have stated that such a move would help restore investor confidence.

“Slower tendering and focus on cleaning the old renewable auctions will ultimately restore investor confidence in RE sector, in our view. We calculate that India conducted more than 90GW of renewable energy auctions in the past two years, and a significant part remains unsigned into power purchase agreements (PPA). This creates uncertainty for developers and investors on the value that needs to be assigned to these award letters (LOAs),” HSBC Global Investment Research wrote in a 23 September report.

Cash-strapped discoms have been unwilling to buy power from projects awarded earlier at a comparatively higher tariff, instead shopping for lower tariffs.

“So far, tariffs have been falling. So, everybody (discoms) just keeps waiting for the subsequent tenders. So, we have also taken several steps to bring stability in this regard,” New and Renewable Energy minister Pralhad Joshi said at the Mint Sustainability Summit on 3 September.

Queries emailed to the spokespersons of the ministries of power and new and renewable energy; and SECI, NTPC, NHPC, and SJVN on late Sunday night remained unanswered.

Central Electricity Regulatory Commission (CERC), India’s apex power sector regulator, has also expressed reservations on the green shoe option.

“REIAs informed that CERC has raised objections to the inclusion of the green shoe option in RE bids, stating that the standard bidding guideline (SBG) does not provide for procurement of additional power through this mechanism,” the minutes of the meeting said and added, “Secretary (Power) observed that, making provision for green shoe option is not reasonable considering even the base capacities itself are unsold.”

“Green shoe option is a deviation from SBG and should not be incorporated in bids by REIAs,” according to the minutes of the meeting.

Rules are in place that ensure that if any renewable energy project is not completed by the prescribed date of completion, then its bank guarantee should be encashed and the developer blacklisted. The meeting also decided that the SBG will be amended to mandate REIAs to transfer the penalty and damage recoveries from generators to end procurers—the discoms.

A successful bidder for a renewable energy project needs to submit performance bank guarantees to the REIAs, with the performance bank guarantee varying between ₹22 lakh per MW and ₹39 lakh per MW for some of the recent SECI tenders.