CERC Announces Phased DSM Reform For Wind And Solar, Tightens Deviation Norms By 2031

The Central Electricity Regulatory Commission (CERC) has issued a new order that will gradually change how wind and solar power developers in India calculate and pay for deviations from their scheduled electricity generation. The transition will begin from April 1, 2026, and will continue over a five-year period, marking a major shift in the renewable energy sector.

At present, under the Deviation Settlement Mechanism (DSM) Regulations, 2024, renewable energy generators are assessed based on “Available Capacity.” This method has allowed more flexibility because wind and solar generation depend on weather conditions. However, the new order introduces a move toward “Scheduled Generation,” which is a stricter and more predictable system similar to that followed by conventional power plants.

To manage this shift smoothly, CERC has introduced a variable called the “X” factor. This factor will gradually reduce over time, allowing developers to adapt without facing sudden financial pressure. For existing projects, the value of “X” will remain at 100% during 2026–27. It will then decline to 80% in 2027–28, 60% in 2028–29, 40% in 2029–30, and 20% in 2030–31. From April 2031 onwards, the value will become zero, meaning renewable generators will be fully aligned with conventional generators in deviation calculations.

Along with this, CERC has also decided to tighten the “tolerance bands,” which define how much generation can deviate from schedules without attracting penalties. For solar and solar-hybrid projects, the tolerance band will reduce from ±10% to ±5%. For wind projects, it will narrow from ±15% to ±10%. These tighter limits are expected to encourage better forecasting and scheduling practices.

The proposal has faced strong opposition from the renewable energy industry. Around 46 organizations raised concerns, highlighting that forecasting technology in India is still developing. Developers warned that stricter rules could lead to revenue losses and may even make some existing projects financially unviable. There were also concerns that high penalties could push certain projects toward becoming non-performing assets.

On the other hand, power distribution companies supported the move. They argued that better forecasting is necessary to reduce grid balancing costs, which ultimately affect consumers. According to them, more accurate scheduling will improve grid stability and efficiency.

In its final order, CERC stated that renewable developers have had sufficient time to improve forecasting capabilities since initial guidelines were introduced in 2015. The commission also pointed to the role of Regional Energy Management Centres (REMCs), which help improve forecasting and scheduling accuracy. It further highlighted “aggregation” as a useful approach, where multiple projects combine their data to reduce the risk of penalties.

Despite ongoing legal challenges in the Delhi High Court, CERC has decided to proceed with the implementation. The commission emphasized that these reforms are necessary to modernize India’s power market and ensure long-term grid security as renewable energy capacity continues to grow.