The Central Electricity Regulatory Commission (CERC) has proposed a new regulatory mechanism to deal with the growing issue of stranded grid connectivity in India’s renewable energy sector. The proposal aims to free up transmission capacity that is currently blocked by renewable energy projects which received Letters of Award (LoA) but failed to sign Power Purchase Agreements (PPAs) for more than a year. According to the regulator, this situation has resulted in valuable transmission infrastructure remaining underutilized while several ready-to-build projects continue to wait for grid access.
The draft order issued by the CERC introduces three separate options for developers holding such stalled connectivity approvals. Through these measures, the commission intends to either push projects toward implementation or encourage developers to voluntarily exit the system so that the unused capacity can be reassigned to active projects.
Under the first option, developers can move away from the LoA-based connectivity route and continue the project independently. However, they will be required to submit a bank guarantee of ₹10 lakh per megawatt. In addition, developers must meet specific deadlines related to land acquisition, financial closure, and project commissioning. The regulator has made it clear that if any of these milestones are not achieved within the prescribed timelines, the granted connectivity will be cancelled and the bank guarantee will be forfeited.
The second option provides flexibility for developers who may have secured a new PPA under another award or tender. In such cases, developers will be allowed to replace their stalled LoA with the newly signed PPA while continuing to use the same transmission connectivity. Similar to the first option, this route also comes with strict timelines for project execution and commissioning.
The third option offers developers a voluntary exit mechanism without any financial penalty. Under this pathway, developers can surrender their connectivity rights and recover the bank guarantees already submitted. The commission described this as a one-time relief measure intended to encourage companies to release unused transmission capacity without suffering financial losses.
Once the connectivity is surrendered, the available transmission capacity will be reallocated through a transparent process. The CERC stated that the capacity will first be offered to existing projects located in the same area. If any capacity still remains unallocated, it will be auctioned to the highest bidder. The commission added that revenue earned from such auctions will be used to reduce transmission charges for consumers.
The proposal follows recommendations made by the Ministry of Power and incorporates feedback received from several industry stakeholders. The CERC has invited public comments and suggestions on the draft regulations until May 21, 2026. Through these measures, the regulator aims to ensure efficient utilization of India’s transmission infrastructure and support the country’s rapidly expanding renewable energy sector.
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