New Delhi: The Ministry of New and Renewable Energy (MNRE) has approved a pilot Contract for Difference (CfD) scheme for 500 MW of renewable energy capacity, appointing the Solar Energy Corporation of India (SECI) as the nodal agency to implement the initiative. The move aims to introduce a market-linked revenue support mechanism for renewable power developers while promoting tradable renewable energy in India’s power exchanges.
Pilot Scheme Overview
According to an office memorandum dated 30 March 2026, accessed by Energy Watch, the MNRE has approved the scheme following SECI’s proposals submitted in October 2025 and January 2026. The pilot is designed to provide developers with a predictable revenue floor without abandoning market-based pricing.
Under the scheme, renewable energy developers will sell electricity directly on power exchanges, while SECI will settle the difference between the market price and a pre-determined strike price.
This approach combines stable revenues for developers with transparent market-based price discovery, a step toward a more mature renewable energy market in India.
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How the CfD Pilot Will Work
Key features of the pilot include:
- Capacity Tendered: 500 MW
- Supply Volume: 1,500 MWh per day during non-solar hours
- Contract Duration: 12 years, on a build-own-operate (BOO) basis
- Bidding Process: Transparent reverse bidding, with a bucket-filling mechanism
- Bid Cap: Maximum capacity per bidder capped at 125 MW
The pilot will test the financial, operational, and regulatory framework for CfD contracts in India’s power market, particularly for non-solar hours when renewable supply is limited.
Understanding Contract for Difference (CfD)
A Contract for Difference is a revenue-stabilising mechanism for energy developers:
- If the market clearing price (MCP) falls below the strike price, SECI pays the shortfall from the CfD pool to the developer.
- If the MCP rises above the strike price, the excess is credited back to the pool.
This structure ensures that developers have stable cash flows while remaining exposed to market signals, promoting both liquidity and efficiency in renewable power trading.
Funding and Settlement Mechanism
The pilot scheme will be supported by a Rs 76-crore stabilisation fund, acting as a revolving buffer for pay-ins and pay-outs. Key points:
- The government’s total outlay under the pilot is limited to Rs 76 crore.
- SECI may retain part of the pool’s profits for operational expenses.
- Settlement could potentially be routed through a power exchange clearing corporation, pending regulatory approval.
This funding design balances risk-sharing between developers, SECI, and the government while ensuring operational sustainability.
Significance for India’s Power Market
The CfD pilot is a policy-significant initiative as India transitions from long-term renewable procurement contracts to market-linked trading structures. Benefits include:
- Encouraging renewable energy developers to participate in power exchanges.
- Providing predictable revenue streams to maintain investor confidence.
- Enhancing liquidity during non-solar hours, when power supply is less predictable.
If successful, the pilot could pave the way for wider adoption of CfD mechanisms across India’s renewable energy sector, supporting the country’s green energy transition and energy market reforms.
Looking Ahead
The pilot CfD scheme represents a strategic step toward making India’s renewable energy sector more market-oriented while safeguarding developer revenues. Its outcomes will influence future policy design, investor confidence, and the growth of renewable energy trading on Indian power exchanges.
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