CERC has approved a phased reduction trajectory for the DSM X parameter used in calculating deviation percentages for wind and solar generators. The order, issued on March 31, 2026, resolves a critical gap under the CERC (Deviation Settlement Mechanism and Related Matters) Regulations, 2024, concerning the transition from available capacity to scheduled generation as the basis for deviation computation.
The new method will use a blended denominator that is X% of available capacity and (100–X)% of scheduled generation to figure out deviation. The current system stays the same when X is set to 100%. As X slowly goes down to zero, deviation calculations will fully match scheduled generation, just like with regular power sources.
For FY 2026–27, CERC has retained X at 100% for all projects, ensuring no immediate change. After that, different paths of reduction will be used. X will drop to 90% for solar and wind-solar hybrid projects in FY 2027–28, then to 75%, 55%, and 30%, and finally to zero by April 2031.Wind projects will follow a slower trajectory—95%, 85%, 65%, and 35% before also reaching zero in April 2031, reflecting higher forecasting uncertainties in wind generation.
Industry Concerns and Grid Stability Rationale
The Commission’s decision is supported by Grid India’s simulation studies and analysis by Prayas Energy Group using 15-minute DSM data across ISTS-connected capacity. The move follows extensive stakeholder consultation involving 46 participants and a public hearing held in December 2025.
Industry bodies, including NSEFI and IWPA, flagged concerns regarding forecasting limitations and financial implications. NSEFI warned that a shift to schedule-based deviation could reduce internal rates of return by up to 5.5 percentage points for solar-hybrid projects and up to 24 percentage points for wind under high deviation scenarios. Some developers also argued the change qualifies as a change-in-law event.
However, distribution companies and system operators supported faster implementation, citing existing forecasting mandates since 2015 and state-level precedents such as Tamil Nadu’s adoption of schedule-based deviation accounting in April 2024.
CERC emphasized grid stability, noting that on May 25, 2025, system frequency exceeded 50.05 Hz for nearly 30% of the day. Karnataka SLDC data for FY 2024–25 showed wind deviations above 250 MW over 60% of the time and similar solar deviations in 37% of instances. Renewable energy’s record 51.5% share on July 29, 2025, further amplified system sensitivity to forecasting errors.
The order applies to both current and future projects, and it also says that there will be no payment for over-injection when the frequency is higher than 50.05 Hz. It is still subject to pending writ petitions in the Delhi High Court, and CERC has confirmed that no coercive action will be taken under the current interim relief.
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