India’s tariff-based competitive bidding (TBCB) framework for renewable energy projects has played a pivotal role in the country’s energy transition, providing industry players with a structured, market-driven mechanism to scale up clean energy deployment while maintaining tariff affordability and ensuring transparency in project allocation. However, rapid technological advancements and the need for greater grid flexibility have highlighted gaps in the existing bidding framework that must be addressed to achieve India’s ambitious energy transition targets.
Therefore, in February 2025, the Ministry of Power (MoP) amended the TBCB guidelines for procuring power from wind, solar, wind-solar hybrid, and firm and despatchable renewable energy (FDRE) projects with energy storage systems (ESSs), and introduced guidelines for pumped storage projects (PSPs). Several significant changes were introduced, including revised compliance requirements for project developers, stringent contractual obligations and new financial instruments, with the aim to ensure project reliability.
A look at the recent amendments to the TBCB guidelines, their impact on private and public offtakers, and their implications for renewable energy development in India…
TBCB amendments for power procurement from solar, wind hybrid and FDRE
The MoP’s amendments to the existing TBCB framework for power procurement from solar, wind, wind-solar hybrid and FDRE projects include several key provisions that redefine procurement strategies and obligations for renewable energy developers. For example, in location-specific bids, procurers may specify the substation for renewable energy projects connected to the interstate or intra-state transmission system. Moreover, if a generator fails to meet the minimum capacity utilisation factor (CUF) outlined in the power purchase agreement (PPA) for two consecutive years, the CUF obligation will be recalibrated based on the generator’s actual average performance over that period. Further, generators that fail to meet the minimum CUF must pay lump-sum damages equivalent to the shortfall for either 24 months or the remaining PPA period, whichever is shorter. Defaulting on this payment will lead to contract termination, thereby reinforcing strict adherence to performance commitments. This adjustment ensures a more pragmatic assessment of operational efficiency while promoting accountability.
The amendments also mandate that provisions related change in law must align with the MoP’s Electricity Rules, 2021, and its amendments. PPAs and power sale agreements (PSAs) must be signed within 30 days of the issuance of the letter of award (LoA). This period can be extended up to 12 months, beyond which the LoA will be cancelled. Distribution licensees must approach the appropriate authority for tariff adoption within 30 days of its discovery. Additionally, to strengthen financial security in bidding, the MoP has introduced insurance surety bonds as an alternative to traditional earnest money deposits (EMDs) and performance bank guarantees (PBGs). These bonds allow procurers to encash PBGs from defaulting generators, with the recovered amount credited to the payment security fund that must be maintained by the intermediary procurers.
The updated guidelines also prioritise technological and cybersecurity measures. Developers must install GPS-enabled automatic weather stations in compliance with standards prescribed by relevant central government agencies. Procurers may also establish technical criteria to encourage competition while ensuring that projects align with cybersecurity regulations, including compliance with directives issued by authorities overseeing cybersecurity in the energy sector.
For solar and energy storage projects, the guidelines emphasise the deployment of commercially established and operational technologies to minimise technological risks and facilitate timely project execution. Any deviations from these guidelines must be approved by the appropriate electricity regulatory commission before bidding commences. The commission is required to approve or mandate modifications to the document within 60 days.
Overall, the new amendments aim to accommodate emerging renewable segments and address sectoral challenges, thereby enhancing investor confidence, streamlining project execution and improving grid integration. In addition, the revised framework provides clearer guidelines on financial guarantees and compliance, enforces strict timelines on PPA and PSA signing and reduces uncertainties for developers and lenders, fostering a more stable market environment.
TBCB guidelines for procurement of storage capacity from PSPs
The MoP has also introduced TBCB guidelines for the procurement of storage capacity from PSPs, providing much needed policy clarity. While guidelines for the procurement and utilisation of battery energy storage systems are already in place, there were no separate guidelines for PSPs. Considering the distinct requirements of PSPs with respect to land acquisition, permits and clearances, project timelines and performance parameters, separate guidelines for PSPs have been formulated to address the unique nuances of PSP technologies.
The guidelines have introduced two procurement modes. In Mode 1, procurers can develop PSPs at government-identified sites on a build-own-operate-transfer basis for 25-40 years. The procurer will be responsible for all pre-feasibility activities before handing over the project to a successful bidder via a special purpose vehicle (SPV). In Mode 2, PSPs can also be developed at sites identified by bidders, or based on already commissioned or under-development projects, on a build-own-operate basis for 15-40 years. For both modes, the financial eligibility criteria states that the net worth/assets under management or investible funds must be at least 20 per cent of the estimated capital cost of the PSP for the financial year in which bids are issued. Moreover, the EMD must be at least 2 per cent of the estimated capital cost, while the PBG must be at least 5 per cent.
The bidding parameters include two models. One, a tolling tariff model in which the bidding will be based on the storage charge (Rs per MW or kW per month or year), with or without viability gap funding. In this case, the input power is arranged by the procurer. Two, a composite tariff model, where the bidders quote a single tariff in Rs per kWh, covering both the cost of input power and storage, with the input power being arranged by the developer. In both models, the procurer has the option to specify an escalating tariff structure.
As per the guidelines, bid submissions are expected within 60 days for Mode 2 and 90 days for Mode 1 from the date of issue of bidding documents. Meanwhile the evaluation of technical bids, financial bids and e-reverse auctions must be completed within 120 days (Mode 2) and 150 days (Mode 1). Regulatory commissions are mandated to adopt tariffs within 60 days of petition filing and failure to do so allows the procurer to extend the project’s scheduled supply commencement date accordingly. The details have been summarised in Table 1.
For interstate transmission system-connected projects, the minimum bid capacity is 50 MW, whereas, for intra-state transmission systems-connected projects, it is 10 MW. Exceptions exist for smaller projects in the north-eastern and special category states. Moreover, developers must demonstrate relevant infrastructure development experience over the past five years, with financial eligibility requiring a net worth of at least 20 per cent of the estimated capital cost of the PSP. PPAs must be executed within six months of the LoA. In addition, the guidelines introduce provisions for compensating developers in the case of transmission constraints or grid security issues. The guidelines also mention technical and performance requirements for PSPs, which have been summarised in Table 2.
Challenges and the future outlook
India’s renewable energy sector has witnessed significant changes in its tariff determination framework – from fixed feed-in tariffs to e-reverse auctions, and in the case of wind, even to a closed bidding mechanism. These reforms have helped reduce tariffs, improve transparency and scale up capacity. However, these transitions have not been without challenges. Some of the issues that have often emerged are delays in PPA and PSA signing, lack of strict quality and cybersecurity compliance and timely payment issues. The revised TBCB guidelines aims to address these issues.
By mandating stricter timelines for PPA finalisation and tariff adoption, the amended guidelines are expected to reduce execution delays and facilitate faster contract finalisation. Further, the new policy guidelines impose stricter compliance obligations on developers, particularly with respect to CUF adherence and financial guarantees, thereby addressing quality concerns. Developers will need to adopt advanced forecasting tools and operational strategies to mitigate these risks and meet the CUF targets.
An notable update has been the mandatory deployment of GPS-enabled automatic weather stations and compliance with cybersecurity regulations, which are expected to further modernise the sector. Additionally, the introduction of alternatives to EMDs and PBGs in the form of insurance surety bonds aims to improve liquidity for developers. However, the long-term viability and success of these bonds remain to be seen.
Net, net, it is encouraging that the government has come up with policy updates to the TBCB guidelines in line with the changing sector dynamics, including the increased adoption of PSPs, hybrid and FDRE projects. These reforms aim to provide greater policy clarity, enhance efficiency and transparency, and reduce risks for stakeholders.
