By S&S Co. Advocates & Solicitors · Published 28 September 2026 · Informational content, not legal advice: see our disclaimer
Overview
A practical guide for a renewable energy developer or a corporate/discom buyer negotiating a PPA, covering the core clauses that determine risk allocation, tariff structure, delivery obligations, change in law, and termination/compensation, as a companion to this site's existing captive-power and open-access guides, focused specifically on PPA drafting.
What You Need to Know
- A Power Purchase Agreement's tariff clause fixes how the generator is paid, a fixed price for the contract term, an escalating price to account for inflation, or a price indexed to market rates, and utility-scale solar tariffs discovered through SECI/CPSU reverse auctions have generally trended toward the lower end of the pricing spectrum in recent years, which developers should factor into their own bid economics
- The energy-delivery clause specifies what the generator must actually deliver, whether structured as a guaranteed minimum output with penalties for underperformance, or a more flexible arrangement tied to the plant's actual generation capacity: this allocation of generation-shortfall risk is one of the most heavily negotiated parts of a PPA
- A Change in Law clause addresses how a legislative or regulatory change affecting the project's costs or revenues will be handled, typically by allowing a tariff or other term adjustment to neutralise the financial impact: developers should ensure this clause captures both central and state-level regulatory changes given India's federal energy-regulatory structure
- Termination clauses set out the circumstances triggering termination, contractual breach, force majeure, or regulatory change, and the compensation payable; a buyer-initiated voluntary early termination typically triggers a termination payment calculated as the net present value of the developer's lost future revenue over the remaining term
- Definitions and interpretation clauses, while often treated as boilerplate, are foundational: key terms like 'Delivered Energy', 'Tariff', 'Force Majeure' and 'Termination Compensation' should be defined precisely, since ambiguity here is a common source of later disputes
- Developers negotiating a PPA should also confirm the regulatory approval and connectivity/open-access sequencing required before the PPA becomes fully bankable, since lenders will typically require these approvals to be in place, or clearly sequenced, before financial close
Frequently Asked Questions
What does a PPA's energy-delivery clause actually allocate?
It allocates generation-shortfall risk, whether structured as a guaranteed minimum output with penalties, or a more flexible arrangement tied to actual generation capacity, making it one of the most heavily negotiated parts of the agreement.
Why does the Change in Law clause matter so much in India?
Because of India's federal energy-regulatory structure, the clause needs to capture both central and state-level regulatory changes affecting the project's costs or revenues, not just one level of government.
How is compensation usually calculated on a buyer-initiated early termination?
Typically as the net present value of the developer's lost future revenue over the remaining contract term, though the exact mechanics vary by contract and by SECI/state-specific model PPA terms.
References & Further Reading
This guide references the following statutes, rules and sources, cross-checked at the time of writing.
- Core PPA clause categories (tariff, energy delivery, change in law, termination/compensation, definitions): general industry-standard PPA structure, confirmed via K&S Partners' legal-considerations guide and multiple industry PPA FAQs at research time
- Termination payment on voluntary early termination calculated as net present value of lost future revenue: confirmed via industry PPA guidance at research time: present as a common approach rather than a universally mandated formula, since exact termination-payment mechanics vary by contract and by SECI/state-specific model PPA terms
- Current utility-scale solar tariff ranges from SECI/CPSU auctions: noted as illustrative and time-sensitive at research time: should be described generally or flagged as varying, rather than citing a specific rupee figure that will quickly go stale
- See also our Power, Energy & Mining Notable Judgments and Legal Updates: Power, Energy & Mining archive.