CERC proposes new framework to address delayed renewable projects and reallocate grid connectivity

The Central Electricity Regulatory Commission has invited stakeholder comments on a staff paper that examines delays in signing PPAs for renewable energy projects that already hold inter-state transmission system connectivity.  

The staff paper, prepared by CERC staff and dated November 2025, identifies a critical challenge in the renewable energy sector. A substantial amount of connectivity to the grid has been granted to projects under the ‘LoA route’ – where connectivity is secured based on a Letter of Award (LoA) from Renewable Energy Implementing Agencies (REIAs) like SECI, NTPC, NHPC, and SJVNL.

However, the subsequent signing of PPAs, which financially cement these projects, has been significantly delayed. As developers typically begin implementation only after a PPA is signed, this has led to a situation where large amounts of granted connectivity are not being used, while the associated transmission infrastructure is either built or under construction. This represents a sub-optimal use of the transmission system, for which consumers ultimately pay.

Data collected from REIAs indicates the scale of the problem. As of June 2025, approximately 31.8 GW of connectivity has been granted on the basis of LoAs where PPAs are yet to be signed. An additional 13.54 GW of connectivity is at the application stage, bringing the total tentative capacity in limbo to 45.34 GW. State-wise data shows Rajasthan has the highest quantum (18,749 MW), followed by Andhra Pradesh (7,113.5 MW) and Karnataka (6,992 MW).

The staff paper presents three main options for entities already granted connectivity under the LoA route where PPA signing has been delayed for over 12 months.

Option-I: Exit from LoA Route Without Surrendering Connectivity

This option allows a developer to exit the LoA route but retain its connectivity slot by converting to the ‘Land’ or ‘Land BG’ route. To avail this, the entity must obtain a No-Objection Certificate from the REIA, furnish an additional Performance Bank Guarantee of Rs. 10 lakh/MW, and commit to a strict timeline. The Scheduled Commercial Operation Date (SCOD) must be within 18 months of conversion, with land documents submitted within 12 months and Financial Closure achieved within 15 months. Failure to meet these milestones would result in revocation of connectivity and encashment of bank guarantees.

Option-II: Substitution of the LoA

A developer can replace the original LoA (LoA1) with a PPA signed under a different LoA (LoA2), issued by the same or a different REIA. This is permitted provided the firm start date of connectivity for LoA2 is at least six months later than that of LoA1. This option is designed to allow a company to use an earlier-granted connectivity slot for a different, more advanced project of its own, its parent, or its subsidiary.

Option-III: Full Exit from Connectivity and Auction

An entity can choose to surrender its connectivity entirely. In this case, the Central Transmission Utility (CTUIL) would encash the initial Connectivity Bank Guarantee (Conn-BG1) but return Conn-BG2 and Conn-BG3. The vacated connectivity would then be auctioned to other developers. The auction would be price-based, with the highest bidder above a base price of Rs. 3 lakh/MW winning the slot. The winning bidder must commit to commissioning the project within 12 to 24 months, depending on the status of the transmission substation. Entities that do not actively choose an option within one month would be deemed to have surrendered their connectivity under Option-III.

Looking ahead, the staff paper proposes two fundamental changes to how connectivity is granted in the future to prevent a recurrence of this issue.

Option-I: Require a Signed PPA

The paper suggests removing the option to apply for connectivity based on an LoA. Instead, only a signed PPA (under Government of India competitive bidding guidelines) would be considered a valid document for applying under this route.

Option-II: Auction-Only Mechanism

A more significant proposal is to move entirely to an auction-based system for granting all new connectivity, doing away with the LoA, Land, and Land BG routes. This would treat connectivity as a scarce resource and allocate it to entities with the firmest commitment and ability to bring a project online quickly.

The CERC staff has invited comments on these proposals from all stakeholders in the power sector as it works towards a final regulatory solution for the efficient utilization of the inter-state transmission system.

The featured photograph is for representation only.