Meta, Amazon, and Microsoft buy green power under a special contract. That’s causing losses

Meta, Amazon and Microsoft are incurring losses on their green energy power purchase agreements (PPAs) that are based on Contract for Difference (CfD), said four people aware of the development.

Power producers and buyers agree to pricing under long-term pacts. When such agreements are based on CfD, either party has to pay the difference between the contracted and the actual price to the other. In case the market prices are higher than the agreed-upon ‘strike price’, the power producer pays the differential to the procurer–in this case, corporates. But if the market price is lower than the contracted price, the company needs to pay the developer.

With the prices falling below ₹1 per unit last month, the tech firms that signed CfD-based long-term PPAs are witnessing an average loss of around ₹1 per unit.

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Corporations and generators enter into CfD-based PPAs for risk management and assured prices. These contracts are important for large corporations to earn carbon credits to meet their green targets.

“The CfD contracts are under stress given the renewable energy prices trajectory,” said one of the four people cited above, requesting anonymity.

“The price touched record lows last month and the recent trend is a rare development. The losses to corporates tied up in CfD-based PPAs would also be unprecedented, although unquantifiable as these PPAs are mostly private,” said an executive with an energy exchange cited above who also did not want to be named. “There are not many corporates in the country who have tied up such PPAs. The major players include the global tech giants.”

Queries emailed to Amazon, Meta, and Microsoft remained unanswered till press time.

“Procuring entities would have been incurring losses in the past two months owing to the fall in market prices of power. Currently, the market-clearing price stands around ₹2.1-2.2 per unit during the solar hours,” said Jatin Arya, director at CareEdge Ratings. “This downtrend has been seen for two months in a row. However, in case prices rebound, these entities may be able to offset such losses over the course of the remaining months of the fiscal.”

Power prices drop in cooler May

The decline in real-time prices comes as demand for power in India’s top six industrialized states flattened in April and cooled in May, as reported by Mint earlier. This suggests a potential fall in factory production at the start of the new financial year.

The average market-clearing price (MCP) on the Indian Energy Exchange during solar hours (11:00-16:00 hours) in May was ₹2.2 per unit against ₹3.5 a unit a year earlier, with prices in some time blocks at nearly ₹0 per unit. The average MCP during non-solar hours (00:00-11:00 hours and 16:00-24:00 hours) was ₹3.8/unit vs ₹5.2/unit in the corresponding period of the previous year.

The Central Electricity Authority (CEA) has projected a peak demand of 270 gigawatt (GW) this year, compared to a record 250 GW recorded on 30 May last year. But May was cooler this year compared with a year earlier, when the peak demand had touched 250 GW. The fall in temperatures drove prices down in the short-term power market. Average market-clearing price (MCP) in the real-time market declined 28% on-year to ₹3.43 per unit in May 2025, indicating ample availability amid tepid electricity volume requirement, said a Crisil report.

Green commitments

AEI New Energy Trading Pvt. Ltd, a subsidiary of Amazon Inc has a 20-year PPA at ₹2.72 per unit from 100 MW (AC)/135 MW (DC) solar power project in Rajasthan. Last August, Microsoft signed a PPA for 437.6 MW of green attributes, marking one of the largest corporate renewable deals in the country. Under this agreement, Microsoft aims to advance its renewable energy targets, while supporting community initiatives such as rural electrification and women’s economic empowerment.

Given the requirement of green attributes for achieving green energy targets, 30% of green energy usage cited by large corporations comprises green attributes sourced through international renewable energy certificates, CfD-based PPAs and virtual PPAs, said Aditya Malpani, senior director and regional business head – west, AMPIN Energy Transition.

Temporary blip

Industry players do not expect real-time renewable energy prices to remain low for long.

“The instance of prices reaching below ₹1 last month was a rare and is unlikely to sustain over the long term. It’s important for industry to come up with a mutually winning contractual structure,” said Malpani of AMPIN Energy Transition.

“One provision could be the introduction of ‘cap and collar’; in other words, lower and upper limits in case of upswings and downswings. Further, merchant projects can offload physical electricity to bulk off-takers under short-term contracts as breakeven prices in third-party sale are still much higher than market-clearing prices in exchanges. Lastly, electricity derivatives being launched in a short while shall provide another hedging mechanism for CfD contracts,” Malpani said, adding that since price volatility is a reason why corporates remain cautious of getting into CfD-based PPAs.

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According to Suddhasatta Kundu, director-power sector advisory at Nangia & Co LLP, the decrease in solar price is attributed to various reasons, including low financing cost, higher generation during the day when demand is low, favourable regulatory provisions, among others.

“In the short term, there may be a reduction in solar price; however, in the long term, CfDs will be a favourable risk-mitigation instrument for the buyer. Green attributes requirement would certainly drive, but it will not solely be the driving factor,” he said.

Rahul Mishra, senior VP & head-C&I, BluPine Energy, said: “While such price movements have prompted discussion around Contract for Difference (CfD)-based agreements, these are largely situational developments rather than indicators of a systemic challenge.”

Noting that for commercial and industrial (C&I) customers, renewable energy procurement remains a long-term strategic choice aimed at energy cost stability, decarbonization goals, and sustainability commitments, he said that CfD structures are designed to balance short-term fluctuations with long-term value, and temporary price dips hardly undermine the fundamental economic or environmental rationale of these contracts.

These developments point to surplus renewable availability during certain periods, which reinforces the importance of storage solutions, transmission and evacuation efficiencies, demand-side flexibility, and innovative contracting models in the future, Mishra said.

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