October 2023

In a recent policy impetus to the burgeoning renewable energy sector, the power ministry has introduced a uniform renewable energy tariff (URET) for renewable energy procurement. URET will establish distinct central pools for different renewable energy segments (such as solar, wind and hybrid energy), each with a five-year duration. Capacity added under power supply agreements within this period will join the pool. While no new capacity will be added to the pool after five years, the existing capacity will remain until the validity of the power purchase agreement (PPA) expires.

Notably, URET complements competitive bidding, preserving the integrity of the renewable energy tariff discovered through competitive processes. The URET for central pools will apply only to end procurers for their contracted capacity, with no impact on the tariff discovered through competitive bidding that is payable to renewable energy generators by the intermediary procurer.

URET is expected to boost renewable energy capacity addition, as a uniform pooled tariff will create a single rate for discoms, removing the barrier for delays in signing PPAs. This will also address the long-standing issue of PPA renegotiation. Often, discoms defer entering into PPAs or force the developers to renegotiate tariffs due to the discovered tariff being different from the previous PPA.

Overall, the introduction of URET is a welcome move that will help meet the country’s renewable energy targets and energy transition goals. It will not only ensure fair compensation for renewable energy generators, but also promote innovation and transparency in the segment.