Transmission Waiver for Renewable Energy Projects, Why India Needs a Rethink
Why in News:
The debate over whether India should extend the transmission-charge waiver for renewable energy (RE) projects has taken centre stage in energy policy discussions. With increasing pressure to scale up RE capacities and investor concerns rising, this issue directly impacts future project planning and the economic viability of clean energy in India.
Introduction:
India’s ambition to reach 500 GW of non-fossil fuel electricity generation by 2030 depends heavily on renewable energy. While incentives like transmission-charge waivers have historically helped boost RE investments, their continued extension is now leading to unintended financial burdens and market distortions. The recent decision to not extend this waiver for projects beyond June 2025 has sparked critical policy debate.
Key Issues and Background:
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Transmission Charge Waivers Originated in 2016: Initially offered to wind (2016) and solar (2017) projects, this waiver removed grid transmission costs for RE developers. It was supposed to end in 2019 but was extended multiple times for projects set up by 2022, 2023, and again till June 2025.
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Mounting Costs: Waiving these charges led to rising expenses being socialized across the power grid. A recent estimate shows ₹1.25 trillion in pipeline project transmission costs, with waived projects already accounting for 70% of the national cost by April 2024.
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Geographical Disparity and Overuse: Only a few states—mainly Rajasthan and Gujarat—host the majority of new RE projects (about 35 GW each of the 160 GW total), causing strain on the national grid.
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Environmental and Legal Challenges: Hasty expansion triggered a ‘right of way’ crisis, especially with overhead transmission lines threatening wildlife, such as the Great Indian Bustard, prompting Supreme Court intervention.
Specific Impacts or Effects:
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Distortion in Tariff System: RE projects located far from consumption centres but granted waivers led to inefficient site selection, impacting the grid’s balance and consumer tariffs.
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Misaligned Investment Decisions: Developers chose cheaper land in remote areas, knowing transmission charges wouldn’t be their burden. This has now made distribution planning costly and unpredictable.
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Industrial Impact: With higher RE costs due to longer transmission, competitiveness for industrial users is threatened.
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HVDC Projects Become Inevitable: The country had to invest in high-cost High Voltage Direct Current (HVDC) corridors, costing up to ₹2.72 per unit for plain vanilla solar projects.
Challenges and the Way Forward:
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End Free-Riding: A price signal must be sent to developers through transmission charges so they account for overall system impact.
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Balanced Incentivization: Future concessions should be targeted only at new/emerging technologies like energy storage, and not to mature sectors like solar and wind.
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Grid Expansion with Planning: While grid capacity must expand, economic principles should guide project placement to ensure cost-effectiveness.
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Transparent Regulatory Policy: The Central Electricity Regulatory Commission (CERC) must regulate charges more clearly, ensuring generators feel the impact of their siting decisions.
Conclusion:
India’s RE transition cannot afford indefinite policy subsidies. The waiver helped in the early stages but now risks destabilizing the sector. The phase-out by June 2025 is a much-needed corrective measure to encourage responsible planning, fair cost distribution, and long-term affordability of green power. The future of RE depends not just on scale, but smart, sustainable integration into the national power ecosystem.
5 Questions and Answers:
1. Why were transmission charge waivers introduced?
To promote investment in renewable energy by removing the cost barrier of transmitting power across the national grid.
2. What are the downsides of extending these waivers?
They caused market distortions, uneven geographical distribution of projects, and burdened the grid and consumers with rising costs.
3. How did the waivers impact consumers?
Transmission costs were socialized, meaning all consumers paid more, even if the RE projects benefited only a few regions.
4. What alternative policy is being recommended?
Only limited, strategic waivers for emerging technologies like energy storage, and making developers bear fair costs of their location choices.
5. What’s the long-term goal for India’s electricity market?
A fair, efficient, and cost-reflective system that encourages reliable, environmentally sustainable power while keeping consumer tariffs affordable.
