Regulatory and Policy Developments in the Indian Electricity Sector

Regulatory and Policy Developments in the Indian Electricity Sector

The Electrical Post 

A.  Act, rules and regulations pertaining to the Electricity Sector
1. Electricity Amendment Bill, 2025, by MoP

The Ministry of Power issued the Draft Electricity (Amendment) Bill targeting key power sector reforms, with a focus on reducing financial stress, enhancing regulatory accountability, enabling cybersecurity and energy storage, and optimising the use of the distribution network. Notable provisions allow distribution licensees to share networks, exempt licensees from supply obligations for large consumers (>1 MW), exempt crosssubsidies for industries, introduce penalties for noncompliance with non-fossil consumption and provide a legal framework for energy storage business models.

2. Draft Electricity (Amendment) Rules, 2005- Captive by MoP

The Ministry of Power issued the Draft Electricity (Amendment) Rules 2005. The amendment provides operational flexibility for captive generating plants (CGPs) by extending the captive benefits to the group companies (whomsoever consumes from the CGP) of the captive user. For a group captive structure (having multiple captive consumers), exemption from CSS will be capped at 100% of a user's entitled proportionate consumption. However, if a captive consumer in a group captive structure holds a minimum of 26% equity in the CGP, it shall be eligible for captive benefits for its entire consumption.

3. GNA (3rd Amendment) Regulations by CERC

The CERC issued the GNA (3rd Amendment) Regulations introducing key changes pertaining to RE connectivity at the Inter-State Transmission System (ISTS). The amendment segregates connectivity into solar and non-solar components, allowing solar projects to inject  power primarily during daylight (solar) hours, while non-solar sources such as wind and energy storage systems can utilise non-solar hours. The move aims to improve  transmission utilisation and encourage the deployment of energy storage for shifting solar power to non-solar hours.

4. Renewable Consumption Obligation (RCO) by MoP

The Ministry of Power issued a revised notification on the Renewable Consumption Obligation (RCO), retaining the overall targets while updating key implementation modalities. The revision reduces Distributed Renewable Energy (DRE) targets to 75% for urban DISCOMs, with the remaining share to be met through other renewable sources. Under the framework, RCO compliance can be achieved through direct consumption of renewable energy, purchase of RECs, or payment of a buyout price.

5.Draft CERC (Power Market) (First Amendment) Regulations, 2025, by CERC

The CERC issued the Draft Power Market (First Amendment) Regulations, 2025, to update the 2021 framework in line with developments such as Virtual Power Purchase Agreements (VPPAs), General Network Access (GNA) and OTC Guidelines. The draft formally introduces VPPAs under the OTC market, enabling financial settlement between renewable generators and consumers based on market price differences; expands OTC contracts to include BESS, power banking, and capacity contracts; and updates regulatory terminology.

6. Final rules for Greenhouse Gases Emission Intensity (GEI) Targets by MoEFCC

The Ministry of Environment, Forest and Climate Change has notified the Final Greenhouse Gas Emission Intensity Target Rules, 2025, prescribing sector-wise (cement, aluminium, chlor-alkali, pulp & paper, petroleum refinery, petrochemical and textile) emission intensity targets (tCO2e per unit of output) for specified years. Noncompliance will attract environmental compensation at twice the average carbon credit price, with funds used to support the scheme’s implementation. The rules are part of the Carbon Credit Trading Scheme (CCTS).

B. Policy, Guidelines/Procedures/Frameworks pertaining to the Electricity Sector

1. Draft National Electricity Policy 2026 

The draft NEP aims to expand India’s installed power capacity to ~2,000 GW, with ~85% from non-fossil sources and ~80% renewable generation share, while ensuring per capita consumption exceeds 4,000 units. The focus areas include resource adequacy, financial viability, generation mix, energy storage, power markets, transmission & distribution, consumer centricity, grid operations, cybersecurity, resilient & flexible grid, data sharing, technology deployment, skill development, disaster management, energy efficiency, environmental sustainability, and financing.

2. Final Guidelines for Virtual Power Purchase Agreements (VPPA)

The CERC issued guidelines for Virtual Power Purchase Agreements (VPPAs), allowing Designated Consumers under the Energy Conservation Act, 2001, to enter into VPPAs with renewable generators directly or via CERC-registered OTC platforms. Physical power shall be sold through exchanges, while the price difference shall be settled bilaterally, and RECs will be transferred to consumers for RCO compliance or green claims. VPPAs are non-transferable, specific delivery contracts, providing long-term renewable supply, hedging against market volatility, and supporting sustainability and ESG objectives.

3. ALMM Order - Inclusion of Solar PV wafers (List- III) by MNRE

The Ministry of New and Renewable Energy has proposed a draft amendment to the ALMM framework to introduce ALMM List-III for solar PV wafers, effective June 1, 2028. The list will be notified only if at least three independent manufacturers with a combined wafer capacity of 15 GW and equivalent ingot capacity are available. Under the proposal, projects covered by ALMM must source modules from List-I, cells from List-II, and wafers from List-III, with limited exemptions for projects bid before the specified cut-off date.

4. CERC Proposal on Phased Trajectory of ‘X’ Factor for Computation of Deviation in W-S Technologies - DSM 

The CERC has proposed a phased transition in deviation calculations for RE projects, shifting the formula from being based on available capacity to scheduled generation by reducing the ‘X’ factor from 100% to 0% between FY 2025-26 and FY 2030-31. All new wind and solar projects with tendering or bid dates on or after April 1, 2026, are proposed to be treated at par with general sellers. This change is expected to increase deviation percentages, making DSM regulations more stringent for RE, and will require enhanced forecasting, scheduling, and deviation management, including aggregation through Qualified Coordination Agencies (QCAs).
 

Published at : Oct 03, 2026 12:25 PM (IST)

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