CERC Proposes New Mechanism To Free Stranded Renewable Energy Grid Connectivity

The Central Electricity Regulatory Commission (CERC) has proposed a new framework to tackle the growing issue of stranded grid connectivity in India’s renewable energy sector. The move comes after several renewable energy developers secured transmission connectivity based on Letters of Award (LoAs) issued by Renewable Energy Implementing Agencies (REIAs), but failed to sign Power Purchase Agreements (PPAs) even after 12 months. As a result, a significant amount of transmission capacity remains blocked by projects that have shown little or no progress.

According to the draft order issued in Petition No. 11/SM/2026, the commission believes that grid connectivity is a scarce national resource and should be allocated only to developers with a clear commitment to execute their projects. The proposed mechanism aims to ensure that unused connectivity is either utilized efficiently or released for other serious developers.

Under the draft proposal, developers holding connectivity without a signed PPA have been given three options. The first option allows developers to shift from the existing LoA-based route to the “land route.” Under this mechanism, developers will have to submit a Performance Bank Guarantee (PBG) of ₹10 lakh per MW as a commitment toward project execution. They will also need to provide land-related documents, complete financial closure, and commission the project within 18 months. The commission believes this route will help identify projects that are genuinely moving toward implementation.

The second option gives developers the flexibility to substitute their original non-progressing LoA with another valid PPA secured under a different LoA. This means developers can use their existing connectivity for projects that already have a confirmed buyer for power. Projects opting for this conversion route will need to complete commissioning within 30 months.

The third option allows developers to surrender their connectivity entirely. In such cases, the existing bank guarantees submitted by developers will be returned, provided they obtain a No Objection Certificate (NOC) from the concerned implementing agency. This option is being viewed as a relief measure for older or delayed projects that may no longer be viable.

The draft mechanism also outlines how the released transmission capacity will be reused. The Central Transmission Utility of India Limited (CTUIL) will first offer the vacant capacity to projects located within the same substation cluster. If any capacity still remains available, it will be auctioned through a transparent bidding process. The developer offering the highest premium above the base price will receive the connectivity rights.

The proposal follows earlier suggestions from the Ministry of Power, which recommended a one-time relief mechanism for legacy projects to surrender connectivity without financial penalties. Before finalizing the framework, the CERC has invited comments and suggestions from stakeholders, including power generators and distribution companies. Agencies such as SECI, NTPC, and NHPC will also be required to submit details of projects where PPAs have remained unsigned for more than a year.