A major subsidy that requires projects commissioned after June to pay transmission costs is ending, posing fresh financial hurdles for India's renewable energy sector.

The country's ambitious clean energy targets may be hampered by this regulatory change, which might raise green energy rates. In order to avoid these fees, states may prefer local initiatives more and more, which might decentralize the generation of renewable energy.

Starting on Tuesday, solar or wind power projects that are put into service after June will be required to pay 25% of the cost of electricity transmission between states. The federal electricity regulator has created a strategy that would increase the fees for plants in the future.

The clean-energy sector had been requesting an extension for months. The National Solar Energy Federation of India's chief executive officer, Subrahmanyam Pulipaka, stated, "Our main argument was that the cost increase will make signing power purchase agreements even harder, especially for projects that have already been auctioned."

According to Pulipaka, tariffs might increase the price of green energy by 0.4 rupees per kilowatt-hour as a result of the regulation change. This is a sixteen percent gain above the lowest auction prices for the fiscal year 2025. Nearly 30 gigawatts of forthcoming capacity are already having difficulty finding long-term distribution due to high electricity costs and a slump in demand, which is threatening India's target of 500 gigawatts of clean installations by 2030.