India Tests Market-Linked Pricing with New 500 MW CfD Pilot for Non-Solar Hours

India Tests Market-Linked Pricing with New 500 MW CfD Pilot for Non-Solar Hours

April 1, 2026

The Ministry of New and Renewable Energy (MNRE) has approved a pioneering 500 MW pilot scheme based on the Contract for Difference model, marking a significant departure from traditional fixed-price Power Purchase Agreements (PPAs). To be implemented by the Solar Energy Corporation of India (SECI), this initiative is designed to integrate renewable energy more deeply into the power markets while providing developers with revenue certainty. The pilot specifically targets the supply of 1,500 MWh daily during non-solar hours, directly addressing one of the biggest challenges in the sector: intermittency.

Under the CFD framework, developers sell their electricity directly on power exchanges but are guaranteed a fixed “strike price.” If the market price is lower than this strike price, a government-backed stabilization fund (initially set at ₹76 crore) pays the difference to the developer. Conversely, if market prices surge above the strike price, the excess profit is returned to the fund. This “two-way” payment system ensures that developers aren’t vulnerable to market volatility, making projects more bankable while allowing the government to maintain fiscal prudence.

The pilot will follow a Build-Own-Operate (BOO) model with a 12-year contract tenure. To ensure healthy competition and broader participation, individual bidders are capped at 125 MW. A unique feature of this Indian pilot is a 30:70 profit-and-loss sharing mechanism between developers and the CFD pool, alongside the monetization of Renewable Energy Certificates (RECs) to sustain the fund. By requiring generators to participate sequentially in the Green Day Ahead and Real-Time markets, the MNRE is not just buying power—it’s building a more liquid, transparent, and mature renewable energy ecosystem for the future.