The Ministry of New and Renewable Energy has approved a pilot ‘Contract for Difference (CfD)’ scheme aimed at transforming India’s renewable energy market by introducing a market-linked pricing mechanism with revenue stability.
The scheme will be implemented by the Solar Energy Corporation of India, which has been designated as the nodal agency.
Key Highlights of the Scheme
1. Pilot Capacity and Supply
- The scheme covers 500 MW renewable energy capacity
- It will supply 1,500 MWh of electricity daily
- Power will be delivered during non-solar hours, helping manage intermittency in renewable generation
2. What is CfD (Contract for Difference)?
- A price stabilisation mechanism
- Developers sell power on electricity exchanges
- A “strike price” is pre-determined
How it works:
- If market price < strike price → Government compensates the difference
- If market price > strike price → excess is returned to the pool
This ensures:
- Revenue certainty for developers
- Market-based price discovery
3. Implementation Structure
- Projects will follow a Build-Own-Operate (BOO) model
- Contract duration: 12 years
- After completion:
- Developers can sell power freely
- Or enter into new agreements (PPAs/bilateral contracts)
4. Bidding and Participation
- Projects will be awarded through competitive reverse bidding
- Maximum allocation per bidder: 125 MW
- Ensures wider participation and fair competition
5. Role of SECI
- SECI will:
- Conduct tenders
- Manage settlement mechanism
- Act as intermediary between developers and market
- Power will be sold in:
- Green Day-Ahead Market (GDAM)
- Day-Ahead Market (DAM)
- Real-Time Market (RTM)
6. Stabilisation Fund
- Government has created a ₹76 crore fund
- Used for:
- Paying shortfalls
- Managing excess gains
- Ensures smooth functioning of the CfD mechanism
Objective of the Scheme
The pilot aims to:
- Test the financial and operational feasibility of CfD in India
- Reduce risks for renewable energy developers
- Move beyond traditional Power Purchase Agreements (PPAs)
- Improve integration of renewable energy into power markets
Significance
1. Market-Based Reform
- Shifts from fixed long-term contracts to dynamic pricing systems
2. Risk Reduction
- Provides stable and predictable revenues to developers
3. Better Grid Management
- Focus on non-solar hours improves energy availability
4. Future Scalability
- Pilot will act as a foundation for large-scale CfD adoption in India
Conclusion
The approval of the CfD pilot scheme marks a major policy shift in India’s renewable energy sector. By combining market efficiency with revenue certainty, the government aims to create a more flexible, competitive, and investor-friendly ecosystem for clean energy growth.