The Ministry of New and Renewable Energy (MNRE) has approved a pilot Contract for Difference (CfD) scheme to change the renewable energy procurement framework in India, the decision set out in an office memorandum dated 30 March 2026. The Solar Energy Corporation of India (SECI) will act as nodal agency to manage the initiative, which covers 500 megawatts (MW) of capacity. The move is intended to shift procurement away from fixed power purchase agreements and towards a market driven system.

Under the mechanism developers may sell electricity directly in the open market and participate in power exchanges rather than depend solely on fixed contracts. A strike price will be discovered through competitive reverse bidding and a central CfD pool will administer daily settlements. When market prices exceed the strike price developers must deposit the excess into the pool and when prices fall short the pool will compensate developers, providing revenue stability while preserving market exposure.

The pilot targets supply of 1,500 megawatt-hour (MWh) of renewable energy each day during non solar hours to meet evening and night time demand when solar output is low. Projects will follow a build own operate model with a contract term of 12 years and a single bidder will not be allowed to win more than 125 MW to maintain competition. Financial gains and losses from market operations will be shared between developers and the CfD pool in a 30:70 ratio and developers must sell any renewable energy certificates and remit proceeds to the pool.

To support daily settlements the government has created a CfD Stabilization Fund of Rs 2,760 million (mn) to act as a buffer, which SECI will maintain over the 12 year period and replenish from its resources if required. SECI may retain up to 25 per cent of pool profits to cover administrative costs but will be barred from withdrawals during the first two years. The pilot will test adaptability of the CfD model in India and is expected to encourage market participation and improve integration of renewable generation with the power system.