The Ministry of New and Renewable Energy (MNRE) has sanctioned a pilot Contracts for Difference (CfD) scheme, to be executed by the Solar Energy Corporation of India (SECI), targeting 500 MW/1,500 MWh specifically for non-solar hours.
A CfD serves as a two-sided price hedge: when market prices drop below a pre-agreed strike price, the renewable generator receives payment for the difference, while they repay the excess when market prices rise above the strike price.
This initiative aims to tackle a significant issue: the evening peak demand in India. According to Vinay Pabba, CEO of Vibrant Energy, “By targeting the three non-solar hours, MNRE’s new CfD guidelines directly address India’s evening peak and indirectly encourage pairing of solar with battery energy storage systems (BESS) for flexible dispatch.”
Several design elements of the CfD are noteworthy. The contract’s 12-year duration is shorter than the typical global range of 15–20 years, which could potentially increase bid prices as developers factor in uncertainties extending beyond the contract term. For meaningful expansion of CfDs in India, a longer contract period may be warranted.
The scheme includes a ₹76-crore stabilization fund, described by Pabba as “fiscally conservative and politically intelligent.” However, he also cautioned that by limiting government risk to ₹76 crore and shifting excess pool loss risks onto SECI, it may weaken the bankability for generators.
The planned bidding sequence — starting from the ‘Green Day Ahead Market’ to the ‘Day Ahead Market’ and then to the Real Time Market — marks a significant intervention. This approach prioritizes green market participation, optimizes volume reductions, and may help alleviate disputes over curtailment and non-clearance.
A less conventional aspect of this pilot is the 30:70 risk-sharing model for gains and losses between the generator and the CfD pool. Typically, classic CfDs allow generators to retain full upside and downside benefits related to the strike price. Easing this connection may compromise price signals and diminish incentives for optimal market behavior. Additionally, the stipulation that revenue from renewable energy certificates arising from brown market sales should be credited to the pool bolsters the financial structure of the scheme but subtracts a potential benefit for developers, possibly leading to higher bid prices.
In summary, the pilot initiative focuses less on increasing capacity and more on the effective integration of renewables into the grid, particularly to address demand during periods when solar energy is not available. This represents a critical challenge for India’s future energy landscape.
The government oversees two primary initiatives under the National Mission for a Green India: the Green India Mission, which focuses on protecting, restoring, and enhancing forest cover, and forest fire prevention and management. However, the Ministry for Environment, Forests and Climate Change has struggled to utilize the allocated budget effectively. A parliamentary standing committee noted that the Budget for 2025-26 allocated ₹220 crore to the mission, which was later revised down to ₹95.7 crore, or 44 percent of the original amount. The ministry acknowledged to the committee that this reduced allocation “slows afforestation and eco-restoration activities, reduces the area of degraded forests taken up for treatment, delays new landscape-based interventions, and constrains support to Joint Forest Management Committees (JFMCs), capacity building, micro-planning, and livelihood activities linked to non-timber forest produce (NTFP) and eco-enterprises.” Furthermore, the ministry had only spent ₹49.95 crore, or 43 percent of the revised budget, by the end of January this year. Consequently, the committee has urged the ministry to investigate the slow pace of fund utilization.
