The waiver of interstate transmission system (ISTS) charges for transporting power from solar, wind and solar-wind hybrid projects has been a major driver for the success of renewable energy auctions and the discovery of affordable tariffs in the sector. These waivers, which were extended for projects commissioned till June 30, 2025, have significantly helped in making such projects viable as they ultimately reduce the landed cost of power generation. Subsequently, these ISTS waivers were given to energy storage and hydropower projects as well.
Along with solar, wind, hybrids, energy storage and hydropower, two other renewable energy segments – offshore wind and green hydrogen – are garnering significant interest from the industry and are expected to emerge as major investment areas in the country. These segments are still in their nascency and it will take time for commercial projects to come up. As such, supportive policies and regulations are required at the onset to provide visibility and confidence to investors and developers.
In line with this, the government recently announced an ISTS waiver for offshore wind projects and an extension in waivers for green hydrogen projects. The aim is to make upcoming and planned offshore wind and green hydrogen projects more viable and give a boost to these segments. According to the official notification issued by the Ministry of Power on May 29, 2023, the ISTS waivers were “deemed necessary to facilitate the execution of offshore wind energy initiatives and to promote the expansion of green hydrogen/green ammonia projects”. The waiver is applicable only for ISTS charges and not for ISTS losses.
The notification allows a complete waiver of ISTS charges for offshore wind power projects commissioned on or before December 31, 2032. The waiver will be applicable for a period of 25 years from the date of commissioning of the project. While onshore wind power projects will continue to be eligible for this waiver up to June 30, 2025, offshore wind projects will now be treated separately and get waivers up to December 31, 2032. Moreover, offshore wind projects commissioned after December 31, 2032, will be eligible for graded ISTS charges depending on their commissioning dates. Thus, 25 per cent, 50 per cent and 75 per cent of the applicable ISTS charges will be levied on projects commissioned from January 1 to December 31, 2033, January 1 to December 31, 2034, and January 1 to December 31, 2035 respectively. From January 1, 2036 onwards, 100 per cent ISTS charges will be applicable.
The green hydrogen policy issued in February 2022 provided a waiver of ISTS charges for a period of 25 years to manufacturers of green hydrogen and green ammonia for projects commissioned before June 30, 2025. According to the latest notification, green hydrogen or green ammonia production units commissioned on or before December 31, 2030 will get a complete waiver of ISTS charges for a period of 25 years from the date of project commissioning. These include green hydrogen and green ammonia manufacturing plants that use renewable energy (commissioned after March 8, 2019), pumped storage systems, battery storage systems or any hybrid combination of these technologies. Thus, the new notification extends the waiver applicability by five and a half years for green hydrogen projects.
Further, like offshore wind projects, green hydrogen and green ammonia units commissioned after December 31, 2030 will be eligible for graded charges. Thus, for green hydrogen and green ammonia projects commissioned from January 1 to December 31, 2031, January 1 to December 31, 2032, and January 1 to December 31, 2033, 25 per cent, 50 per cent and 75 per cent ISTS charges will be applicable respectively, and 100 per cent ISTS charges will be levied from January 1, 2034 onwards.
The recent notification also specifies that the applicability of ISTS waivers for pumped storage projects will be decided based on the date of award of the project rather than its commissioning, owing to the long gestation timelines. Thus, pumped storage projects will receive an ISTS waiver where construction work is awarded on or before June 30, 2025. This is similar for hydropower projects as well, where the ISTS waiver applicability is decided based on the award of construction work and signing of the PPA instead of commissioning dates.
Graded ISTS charges have not been notified for solar, wind or hybrid projects that have already proven their viability and are witnessing massive investments. However, graded ISTS charges have been announced for hydropower projects that have suffered historically due to various challenges and have not witnessed much uptake in recent years. Thus, graded ISTS charges for offshore wind and green hydrogen projects are intended to address the likely challenges related to cost and offtake on a long-term basis and provide a fillip to these emerging areas of opportunity.