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India Ends Key Transmission Subsidy for Renewable Energy Projects

India has discontinued a crucial interstate transmission charge waiver for renewable energy projects, effective July 1, 2025, despite strong industry lobbying. Projects commissioned after June will now bear 25% of the cost of transmitting power across states—a cost that will increase for future plants, based on guidelines from the federal power regulator.

The subsidy was instrumental in accelerating renewable energy deployment by lowering power transmission costs. With its removal, the financial burden on solar and wind developers is expected to rise significantly. According to Subrahmanyam Pulipaka, CEO of the National Solar Energy Federation of India, this policy shift could make it harder to finalize power purchase agreements, especially for projects already auctioned under previous cost assumptions.

Tariffs could increase by Rs0.40/kWh—about 16% higher than the lowest rates discovered in FY2025 auctions—potentially slowing down the pace of renewable adoption and affecting project viability.

This move adds further pressure on an industry already contending with oversupply, tighter margins, and infrastructure challenges. While the government aims to align renewable energy policy with long-term grid economics, stakeholders warn this could deter investments and impact India’s 2030 renewable energy targets.