India’s Strategic Shift: MNRE Approves 500 MW Pilot Contract for Difference (CfD) Scheme

The Ministry of New and Renewable Energy (MNRE) approved a 500 MW pilot Contract for Difference (CfD) scheme on April 01, 2026. Implemented by the Solar Energy Corporation of India (SECI), the initiative aims to demonstrate fiscal prudence, operational transparency, and institutional scalability. The program enables market-linked renewable procurement with assured pricing to facilitate the integration of renewable energy into national power markets.

Core Project Specifications

Capacity: 500 MW total renewable energy capacity.
Energy Output: 1,500 MWh daily supply requirement (500 MW x 3 hours).
Time Blocks: Supply is mandated during non-solar hours to address intermittency challenges.
Model: Build-Own-Operate (BOO) project development model.

The ‘Strike Price’ and Market Mechanism

Under the CfD framework, RE Generators (REGs) sell electricity directly on power exchanges rather than through traditional fixed-delivery contracts. The “strike price” serves as the fixed revenue target for the generator.

Settlement Benchmark: All financial settlements are benchmarked to zonal Day-Ahead Market (DAM) prices.
Settlement Process:
- Shortfalls between the market-clearing price and the strike price are compensated by the CfD pool to ensure revenue predictability.
- Excess gains generated when the market price exceeds the strike price flow back into the pool.
Bidding Sequence: The mechanism mandates sequential bidding across the Green Day Ahead Market (GDAM), Day Ahead Market (DAM), and Real Time Market (RTM) to enhance liquidity and reduce curtailment risks.

Financial Framework and Profit/Loss Sharing

The financial structure incorporates safeguards to maintain the stability of the CfD pool and provide revenue certainty for participants.

Stabilization Fund: The Government has provided a dedicated INR 76 crore (₹760 million) CfD Stabilisation Fund to manage market settlements.
Sharing Ratio: A 30:70 profit-and-loss sharing ratio is established, with 30% allocated to the RE Generator (REG) and 70% to the CfD pool.
REC Monetization: Proceeds from the monetization of Renewable Energy Certificates (RECs) flow into the CfD pool to support its capitalization.

Implementation and Timeline

Project developers must adhere to a structured procedural path for selection and long-term operation:

Selection Process: RE Generators (REGs) are selected through a competitive reverse bidding process.
Participation Cap: To ensure broad institutional participation, a cap of 125 MW is applied to each individual bidder.
Contract Tenure: The CfD contract is set for a 12-year duration.
Post-Contract Options: Following the 12-year term, the RE Generator (REG) may continue as a merchant market participant without a CfD or enter into new Power Purchase Agreements (PPAs) or bilateral contracts.

Strategic Context

India’s renewable energy capacity surpassed 190 GW as of December 2025. This pilot marks a strategic policy evolution from traditional fixed-delivery Power Purchase Agreements (PPAs) toward dynamic, market-linked frameworks. By implementing this 500 MW scheme, the ministry intends to test the financial and operational viability of the CfD model as the sector seeks to integrate large-scale renewables into the national grid and power exchanges.