As the deadline for the Inter-State Transmission System (ISTS) charges waiver approaches, additional substations are critical to ensure the smooth facilitation of renewable energy projects.

The government has extended the ISTS charges waiver deadline multiple times since 2019. The latest extension applies to solar, wind, renewable energy hybrid, pumped hydro storage, and battery energy storage systems commissioned by June 30, 2025. This waiver will remain in effect for 25 years.

The objective behind the waiver of ISTS charges was to encourage renewable capacity addition by reducing the cost of generation to achieve the country’s non-fossil fuel energy capacity of 500 GW by 2030. The Ministry of Power also broadened the waiver’s coverage to encompass hydropower projects, offshore wind, green hydrogen, and green ammonia projects.

According to a developer, “The Central Electricity Regulatory Commission has nine separate transmission zones with the resultant ISTS charges for renewables ranging from about ₹1 ($0.012)/kWh to ₹2.30 ($0.028)/kWh. So, without the ISTS charges waiver, some projects may become unfeasible.”

While the initiative and relief provided by the extension are commendable, the transmission infrastructure challenges, especially the shortage of substations, are a huge concern for projects under development. If the projects are delayed due to these constraints, the developers could miss out on the waiver, and the projects could end up being economically unviable.

The developers are looking for proactive measures by the government to address the infrastructure gap before it impacts the projects that are bid factoring ISTS charges waiver.

A renewable energy developer told Mercom, “For projects that are under development but are not commissioned by the 2025 deadline solely due to issues related to transmission or sub-station infrastructure, developers will have the option to invoke force majeure.”

However, some stakeholders have also pointed out that the risk of not commissioning the projects is far higher than not qualifying for the waiver of ISTS charges.

The Central Transmission Utility (CTU) regularly releases a list of available substations and those already engaged.

For the projects lined up for construction, the developers need to regularly check the available substations and purchase land closer to those substations to avoid challenges.

The developer added, “Despite approximately 40 GW of available transmission capacity, these resources are in states with relatively lower solar irradiation. Developers will have to consider the lower energy generation in these locations before participating in bids to avoid quoting unrealistic lower tariffs.”

According to another developer, “During the long-term access (LTA) regime, the power generators were to pay the ISTS charges. This led to a large majority of the renewable energy capacity being concentrated in regions like Rajasthan and Gujarat, causing huge grid congestion. Now, in the GNA regime, the ISTS charges are levied on the beneficiaries. For projects being developed under competitive bidding by implementing agencies, the charges will act as a deterrent for ISTS-connected projects. The government is implicitly ensuring renewable energy projects are developed through state-level bids, especially in states where the renewable energy uptake has been low and where there is no grid congestion, like in Bihar, Uttar Pradesh, Punjab, and Haryana, among others.”

Impact on green energy open access projects

For green energy open access projects, the waiver of ISTS charges results in lower project costs, translating to attractive tariffs for businesses procuring power from ISTS-connected green open access projects.

Subrahmanyam K V, Vice President of Business Development of Radiance Renewables, said, “As of February 2024, there is a demand for GNA connectivity by consumers totaling approximately 7 GW, out of a total project connectivity of 12.5 GW ”

He pointed out three pressing problems leading to the substation shortages. He said, “There exists a disparity between planned capacity and actual implementation on the ground. It’s imperative to strategically position substations near areas abundant in resources, facilitating the establishment of co-located solar and wind projects. Given India’s rich solar and wind resources, the emphasis should be on pursuing hybrid power projects wherever feasible. Co-located projects also offer reduced transmission charges compared to standalone ones. Furthermore, the absence of a standardized process for GNA regulations in each state for NOC requisition and scheduling underscores the need for inter-state collaboration to streamline procedures ”

Another leading developer emphasized that ISTS allows green power to be delivered through open access to states lacking favorable policies or availability of land.

For example, although Uttar Pradesh is known for the high demand for green energy by consumers, developers face challenges of unfavorable conditions compared to states like Maharashtra or Karnataka, which have suitable land, solar irradiation, and supporting policies.

In such scenarios, the exemption of ISTS charges proves beneficial for both consumers and developers, allowing access to green power at a reasonable cost. Without this exemption, consumers would be compelled to purchase green power at higher rates than those offered by DISCOMs, making green power procurement unfeasible.

With the tight timeline of June 2025 looming for setting up all transmission projects, an extension is crucial, as not all projects can be completed within this timeframe.

Currently, Karnataka, Maharashtra, Gujarat, Tamil Nadu, Rajasthan, and Uttar Pradesh continue to remain preferred states for ISTS projects.

Additionally, stakeholders have highlighted several challenges encountered during the execution of green open access projects. One notable issue is the involvement of numerous nodal agencies in the approval process, which creates obstacles in securing timely and seamless approvals.

Despite ISTS charges exemption for green energy open access projects notified by the central government, stakeholders have told Mercom they still must obtain approvals from both states involved, resulting in a cumbersome procedure.

Developers look forward to establishing a centralized “Open Access Cell” to streamline application processes and expedite approvals.

Extension of ISTS Waiver

Kannan Krishnan, Joint Managing Director of Jakson Green, calling for an extension of the waiver, said, “Extending the ISTS charges waiver for another three years will undoubtedly serve as a catalyst for exponential growth within the industry. However, it’s evident that further infrastructure development, particularly the establishment of additional substations, is essential for the seamless execution of ISTS projects”.

“We believe an extension beyond 2025 will facilitate a smoother transition and sustained growth trajectory for the renewable energy sector. This extension will provide the necessary time for infrastructure alignment and foster an environment conducive to industry expansion and innovation.”

In Subrahmanyam’s view, granting a minimum extension of one year would aid round the clock renewable energy in an effective way. Without such an extension, consumers are left exposed to an open risk of transmission charges which can upset the project economics.

Given the ambitious industrial net zero targets, stakeholders are advocating for an extension until 2030 to facilitate more installations to meet these targets, akin to the extension already granted for green hydrogen and ammonia projects.

Mercom earlier reported on how green energy open access developers want ISTS charges waived beyond June 2025