Renewable Energy Curtailment: Who Bears The Commercial Risk When Power Cannot Reach The Grid?

On 30 March 2026, India lost about 34 GWh of renewable generation in a single day, not because the sun did not shine or the wind did not blow, but because there was not enough transmission capacity to carry the power. The plants were ready, the power was available, and yet it went nowhere.

The short answer to the question in the title is that it depends on why the power could not be evacuated. Where a load despatch centre curtails a must-run renewable plant for reasons other than grid security, Indian law and regulators have placed the cost on the procurer, which must compensate the generator at the tariff agreed in the power purchase agreement ("PPA"). Where the problem is that transmission infrastructure is not ready, or that the plant has only temporary access to the grid, the position is far less settled, and much of the risk falls back on the developer unless its PPA expressly allocates it elsewhere.

This article examines the legal framework for curtailment in India, how regulators have applied it, how standard PPAs allocate the risk, when developers may rely on force majeure or change in law, and what all of this means for lenders, investors and power purchasers. It is written for developers, financiers, procurers and their advisers who need a clear view of where the risk currently sits.

The Scale of the Problem: Generation Is Outpacing Transmission

Solar and wind plants can be built in a year or two, whereas a major transmission corridor can take several years, particularly where right of way, forest clearances or environmental litigation intervene. The consequences are now visible in the data.

1. Curtailment - The global energy think tank, Ember, estimates that about 470 GWh of renewable generation from inter-state projects was curtailed in the first quarter of 2026, of which roughly 300 GWh, or nearly two-thirds, was caused by transmission constraints.
2. Stranded capacity - Institute for Energy Economics and Financial Analysis (IEEFA) estimated in October 2025 that around 50 GW of renewable capacity across India was stranded by transmission bottlenecks, including about 8 GW of Rajasthan's 22 GW of operational inter-state projects as of July 2025.
3. Peak-hour shutdowns - In Rajasthan, projects operating under temporary general network access faced almost complete curtailment during peak solar hours in December 2025, even after a new 765 kV line was commissioned.
4. Delayed connectivity - Around 20 GW of projects may face connectivity delays of more than four months in 2026-27, and Ember estimates that a delay of six to twelve months can reduce a solar project's internal rate of return by 100 to 200 basis points.

Behind every one of these figures is a commercial question, i.e., who pays for power that could have been generated but was not.

Curtailment, Backing Down and Stranding: Three Different Problems

The word "curtailment" is often used loosely, but the legal consequences depend on which of three situations has arisen.

1. Curtailment for grid security - The load dispatch centre instructs a plant to reduce output because of a genuine threat to the stability or safety of the grid. This is permitted, and generally carries no right to compensation.
2. Curtailment for other reasons - The plant is backed down for commercial reasons, such as the procurer preferring cheaper power, or without any documented grid security justification. This is where the law most clearly protects the generator.
3. Inability to evacuate - The plant cannot export at all, or only in part, because the transmission system it was meant to connect to is incomplete, delayed or congested, or because it has been given only temporary access. This is the problem now growing fastest, and it is the one the law addresses least clearly.

Much of the uncertainty in curtailment disputes comes from treating these three situations as one.

The Legal Framework: Must-Run Status and the Must-Run Rules, 2021

Solar, wind and wind-solar hybrid plants have long enjoyed "must-run" status under the grid code framework, meaning that they should not be backed down in favour of other sources except for grid security. The Central Government placed this on a statutory footing through the Electricity (Promotion of Generation of Electricity from Must-Run Power Plants) Rules, 2021, notified on 22 October 2021 under the Electricity Act, 2003.

The Rules provide three key protections:

1. No commercial curtailment - A must-run plant shall not be curtailed or regulated on account of merit order despatch or any other commercial consideration.
2. Limited exceptions - Curtailment is permitted only in the event of technical constraints in the grid or for reasons of grid security, and must follow the Indian Electricity Grid Code.
3. Compensation - Where a must-run plant is curtailed outside those exceptions, the procurer must compensate the generator at the rates specified in the PPA.

Hence, the Rules answer the second of the three problems clearly. They say much less about the third, as a plant which cannot evacuate because a transmission line is unfinished has not, strictly, been curtailed by anyone.

How Regulators Have Applied the Must-Run Principle

The leading decisions have all concerned curtailment by State load despatch centres, and they have consistently required that grid security be proved rather than asserted.

Three themes emerge from these decisions:

1. The burden falls in practice on the load despatch centre to show, through contemporaneous records, that curtailment was genuinely needed for grid security. Telephonic instructions without recorded reasons have not been accepted.
2. Compensation follows the PPA tariff, although the earlier decisions applied a reduced rate of 75 per cent for curtailment that occurred before the position was settled.
3. Recovery can take years. The Tamil Nadu dispute began before the State Commission in 2016, and the Andhra Pradesh claim remains stalled by parallel litigation. A right to compensation is valuable, but when it will be paid is far from certain.

How PPAs Allocate Curtailment Risk

Standard PPAs issued by renewable energy implementing agencies such as the Solar Energy Corporation of India ("SECI") contain specific provisions on generation compensation for off-take constraints. The clause dealing with grid unavailability illustrates how the risk is shared.

Under it, where a plant is able to generate but cannot export because of temporary unavailability of transmission for reasons not attributable to the developer, the generation lost is calculated by multiplying the plant's average hourly generation by the hours of unavailability. However, the remedy is not a cash payment. Instead, the procurer buys additional generation equal to the lost amount at the PPA tariff, offset over the following three contract years. The clause also requires documentary evidence from the competent authority, and states that this compensation is the developer's only remedy.

This protects revenue over the life of the contract, but not cash flow in the year the loss occurs, which is precisely when debt service falls due. It also assumes the plant will be able to export the additional energy in later years, which a plant in a congested region may not.

The bigger gap concerns plants which have been connected only on a temporary basis. Under the general network access regime, a project which is commissioned before its permanent access becomes effective may operate under temporary general network access, which ranks lower in priority. During congestion, such projects can face complete shutdown while projects with permanent access continue to operate. Whether such a project can claim compensation under its PPA or under the Must-Run Rules depends on the precise wording of its contract and remains open to dispute. Ember has recommended harmonising curtailment compensation across inter-state and intra-state projects, which suggests that the current position is neither uniform nor settled.

Force Majeure: Relief in Time, Not in Money

Force majeure is the provision developers most often reach for when transmission is delayed, but it rarely solves the commercial problem. In a typical PPA, force majeure excuses a party from performing for as long as the event continues and extends the scheduled commissioning date. It does not usually entitle the developer to be paid for energy it could not deliver.

The Great Indian Bustard litigation illustrates both the value and the limits of force majeure. Following the Supreme Court's restrictions on overhead transmission lines in the bird's habitat in Rajasthan and Gujarat, many renewable projects could not be connected on time. In January 2026, the Ministry of New and Renewable Energy approved time extensions for affected projects, treating the delay as force majeure for the period from the later of 21 March 2024 or the date approval was sought for the overhead lines, until 19 December 2025, when the Supreme Court delivered its judgment. Developers may pass the same benefit on to their EPC contractors and equipment suppliers, although projects with scheduled commissioning dates before 21 March 2024 were excluded.

The relief protected developers from liquidated damages and termination for delay, but it did not compensate them for revenue lost during the period. Moreover, force majeure in the PPA operates only between the developer and the procurer. The transmission service provider whose line was delayed may itself be excused under its own transmission service agreement. In June 2026, the Central Transmission Utility issued an advisory requiring transmission service providers to submit force majeure and change-in-law claims, supported by specific contractual provisions, to a committee for review. Thus, a developer may find that the party whose delay caused its loss is excused under one contract, while it remains unpaid under another.

Change in Law: When Can Developers Claim Compensation?

Change in law offers a route to money rather than time, but only if the cause of the loss falls within the definition in the PPA. Typically, this requires a change in an Indian law, regulation or binding direction after the bid date which increases or decreases the cost of the project. In Energy Watchdog v. Central Electricity Regulatory Commission (2017) 14 SCC 80, the Supreme Court held that a change in Indonesian law affecting coal prices did not amount to a change in law under Indian PPAs, and that an increase in cost alone does not amount to force majeure. The same discipline applies to curtailment claims.

A developer may therefore have a change-in-law claim where its loss results from a new regulation, a change in connectivity rules or a binding government direction issued after the bid date. It is unlikely to succeed where the loss simply results from physical congestion or delays in construction under the existing framework. The Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021 provide a mechanism for adjusting the tariff once a change in law is established, but the threshold question of whether the event qualifies remains a matter of contractual definition. As CEEW has noted in its analysis of renewable PPAs, clauses which define change in law narrowly or vaguely have left developers without relief in the past.

What It Means for Lenders, Investors and Power Purchasers

Each party to a renewable project carries a different part of the curtailment risk.

Practical Takeaways

Curtailment risk cannot be removed, but it can be priced and allocated far more deliberately than many current contracts do.

1. Know which problem you are dealing with. Grid security curtailment, commercial curtailment and inability to evacuate carry different legal consequences, and claims should be framed accordingly.
2. Keep a contemporaneous record. Every curtailment instruction, its time, duration and stated reason should be recorded, as compensation claims have succeeded where load despatch centres could not justify their instructions.
3. Check the access position before investing. The difference between temporary and permanent general network access can determine whether a project runs during peak hours at all.
4. Read the compensation clause for cash flow, not just value. Compensation through additional procurement over three years may preserve the economics of a project while still leaving it short of cash to service debt.
5. Draft change-in-law and force majeure clauses with transmission in mind. Where possible, developers should seek express coverage for changes in connectivity rules and for delays in associated transmission systems, and should align the relief in their EPC and supply contracts with the relief available under the PPA.

Conclusion

So, who bears the commercial risk when renewable power cannot reach the grid? Where a must-run plant is backed down for reasons other than grid security, the law now places that risk on the procurer, and regulators have enforced it, although recovery can be slow. Where the problem is that the grid itself is not ready, the risk largely remains with the developer, who may obtain more time through force majeure but will rarely recover lost revenue unless its PPA or a change in law clearly provides for it. However, the scale of the transmission gap is turning what was once an occasional dispute into a structural feature of the market. Until the regulatory framework addresses evacuation risk as clearly as it now addresses commercial curtailment, the allocation of that risk will be decided, project by project, by the wording of each party's contracts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.