Maharashtra’s revised Multi-Year Tariff (MYT) order has reset the rules for commercial and industrial (C&I) solar in the Maharashtra State Electricity Distribution Company (MSEDCL) territory. With banking restricted to the same Time of Day (ToD) slot, the Internal Rate of Return (IRR) for existing solar projects will take a sharp hit, as the post-investment savings assumptions are altered.

With same-slot banking (09:00–17:00), consumers lose the ability to offset expensive peak power with cheaper solar generation, thereby reducing the financial attractiveness of captive solar open-access projects.

Overall, this policy has pushed consumers toward hybrid solutions (solar plus storage) or round-the-clock (RTC) renewable power, as standalone solar with restricted banking is becoming less economically attractive under the revised tariff structure.

According to Kushal Shah, Director at B. U. Bhandari Energy, “The IRR, previously projected under more flexible banking assumptions, is now estimated to decline by nearly 50% in comparable scenarios.”

Industry observers say that it marks a major shift in how solar is sized, priced, and contracted in India’s second-largest open-access solar market.

Ishaan Gadhoke, Executive Director at Vibgyor Energy, noted, “Industry estimates  effective electricity cost increases of 20%-30% for non-adapting C&I consumers. Maharashtra’s pipeline is 86% standalone solar, which is structurally exposed.” .

Significant IRR Erosion Observed

The regulatory changes are not limited to new installations but are also expected to affect already commissioned projects.

Shah said the recent changes in banking regulations can significantly alter the financial landscape for solar open access projects, particularly in the C&I segment. “The shift to same ToD banking has led to a substantial erosion of project returns.”

“Developers report that existing assets will witness a notable decline in IRR, primarily due to extended payback periods,” he added.

For existing projects, this means the original financial model may no longer hold. Developers or consumers may have planned for each banked solar unit to offset a higher grid tariff. However, under the revised framework, banked solar units may now be adjusted only against lower-value daytime consumption and, in turn, have limited commercial value. As a result, annual cash savings fall, payback periods lengthen, and the IRR declines.

In IRR terms, the effect is simple: the upfront CAPEX remains the same, but future cash inflows fall. As a result, IRR could drop significantly if peak-hour savings are removed and additional charges apply.

Shah noted that most power purchase agreements (PPAs) and financial models were structured based on the premise of unrestricted or flexible banking. The regulatory shift, therefore, disrupts foundational assumptions used during project planning and financing.

Retrospective Application Raises Concerns

Existing projects were financed, contracted, and commissioned based on the earlier banking rules. If implemented retrospectively, the revised regulations could place additional financial strain on developers.

Talking about retrospective application, Gadhoke noted, “One, the order is silent on explicit grandfathering of pre-existing PPAs and long-term open access agreements. The settled principle that regulatory changes apply prospectively will be tested. Two, the same-slot rule applies in MSEDCL territory but not in Tata Power or Adani Electricity areas, making the arbitrage unlikely to persist. Three, change-in-law treatment in C&I PPAs will determine whether developers absorb the impact or whether tariffs are renegotiated.”

For projects without battery storage, the regulation effectively removes the ability to shift solar value across time. Storage can preserve some peak-hour benefit but adding it later increases CAPEX and may still dilute returns.

“As a direct consequence of reduced banking flexibility and additional storage investments, the effective cost of power for consumers is expected to rise by approximately 20%-30%, reducing overall savings from solar adoption,” Shah noted.

Way Ahead: Need for Clarity

There is still no clarity over the implementation of the revised banking regulations. In a recent development, the Appellate Tribunal for Electricity issued an interim order staying the issuance of disconnection notices and electricity bills raised under the new power banking mechanism.

For new C&I projects in Maharashtra, solar paired with storage has emerged as the most viable configuration, further supported by the state’s Renewable Energy and Energy Storage Policy 2025-26 to 2035-36, which requires all new C&I solar installations above 100 kW to include co-located battery energy storage systems.

“For installed projects, an explicit grandfathering provision, or, at a minimum, a transition window with a defined banking charge in place of the same-slot lapse, remains the constructive next step,” Gadhoke added.

“The issue is not the move toward cost-reflective tariffs and ToD pricing. That shift is inevitable as renewable penetration rises and grid management becomes more complex. The concern is the absence of a clear implementation pathway for projects, contracts, and financial models built under a different framework. The market needs a reasonable one- to two-year transition window, particularly for projects that are already financed and operational. Retrospective application of such regulations raises serious concerns around policy predictability and investor confidence in Maharashtra’s renewable energy market,” said Raj Prabhu, CEO of Mercom Capital Group.