Waiver of ISTS Charges-Will Power Ministry Oblige RE Developers?

Inter State Transmission Charges or ISTS charges are a key component of power bills across India. Thus, their waiver for renewable energy producers has been a major support on which the energy has grown, by helping keep costs lower than they would otherwise have been. Of course, most states have sought to extract their own costs through various open access charges in the commercial segment.

The last extension of the waiver of Inter-State Transmission system (ISTS) charges was issued in 2021 for projects to be commissioned up to 30th June 2025. In that order, the waiver has gone beyond solar, wind to include Hydro Pumped Storage Plant (PSP) and Battery Energy Storage System (BESS), trading of RE in the power exchanges and seamless transmission of RE power across the states. The earlier deadline for 100% waiver was June 30, 2023.

With the waiver planned to be reduced progressively between 2025 and 2028 in quantum of 25% each, renewable energy producers have made a strong pitch for extending the 100% exemptions till 2030 at least. The waivers are usually for a period of 25 years for solar and wind.

The requests come at a time when over 40 GW of awarded green energy projects are struggling or still to find buyers, to proceed to the next step of signing PPAs and actual work to begin.

The renewable energy players have claimed that the ISTS waiver helps renewable energy developers avoid Rs 0.4-1.8 per unit in charges that would have incurred otherwise, something that would delay capacity additions significantly. State discoms, the primary buyers of utility scale renewable energy, remain in a poor financial state, making them reluctant to purchase solar energy at costs over Rs 2.80-Rs 3 for instance, or even wind energy at rates over Rs 3.25, as seen in recent deals.

The June deadline is expected to lead to a rush to complete renewable energy projects to benefit from the waiver, something that will assure a strong performance for the financial year Fy25 in any case. Considering everything, with momentum just building up, the government may not be in a position to refuse outright, although an extension to 2030 seems difficult, considering the pressure building up to invest in enhancing transmission infrastructure as well. According to government data, transmission charges (without waiver) are approximately Rs 52,691 crore per year while the quantum of ISTS waiver is only around 7 per cent at Rs 3,602 crore.

A halfway solution of 75% waiver for a longer period, or even a short extension of the 100% waiver to 2028, seems more likely.