Policy Analysis on Deviation Settlement Mechanism (DSM) in India for Solar and Wind Energy: Historical to Present

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Introduction

The Deviation Settlement Mechanism (DSM) in India addresses grid stability challenges by ensuring discipline in power scheduling and forecasting. With the increasing penetration of renewable energy sources (RES) like solar and wind, DSM policies have evolved to manage variability and intermittency. This analysis traces the history and evolution of DSM for solar and wind energy in India, highlighting regulatory frameworks, challenges, and future outlooks.

Historical Context

Pre-2010: Conventional Grid Management

  • Focus on Conventional Energy: Grid management relied on thermal and hydro power plants, which are more predictable than RES.
  • Need for Deviation Management: As renewable energy deployment began, the unpredictability of wind and solar generation started affecting grid stability.

2010-2014: Initial Renewable Energy Penetration

  • Wind Energy Growth: Wind energy capacity surged, especially in Tamil Nadu and Gujarat, causing frequency deviations in the grid.
  • Introduction of the Availability-Based Tariff (ABT):
    • ABT, introduced in 2002 and operational by 2006, laid the groundwork for deviation management through a frequency-linked tariff structure.
    • Renewable energy was exempt from DSM charges during this phase due to its nascent stage and policy emphasis on promotion.

Modern Era: 2014 to Present

2014: Introduction of DSM Regulations

The Central Electricity Regulatory Commission (CERC) introduced DSM Regulations to bring grid discipline and manage deviations effectively.

  1. Applicability to Renewable Energy:

    • Initially, solar and wind generators were given leniency due to the challenges in forecasting generation.
    • DSM charges were applicable only for deviations exceeding a ±12% range for these generators.

  2. Key Features:

    • Charges were linked to grid frequency, incentivizing generators to align closely with their schedules.
    • The mechanism penalized over-injection and under-injection to prevent grid disturbances.

2015-2019: Stricter Norms for Renewables

  1. Forecasting and Scheduling Regulations (2015):

    • Mandated renewable energy generators to submit day-ahead forecasts.
    • Allowed deviations within ±15% without penalties.

  2. DSM Amendment (2018):

    • Tightened permissible deviation range to ±10% for solar and wind generators.
    • Introduced a graded penalty structure for deviations, increasing accountability.
    • Encouraged the adoption of advanced forecasting tools.

  3. Wind-Solar Hybrid Systems:

    • Policies incentivized hybrid systems to stabilize generation and reduce deviations.

2020-Present: Enhanced Regulatory Framework

  1. DSM Amendments (2022):

    • Further reduced permissible deviation range to ±5%, pushing generators to improve forecasting accuracy.
    • Introduced Area Control Error (ACE) as a measure to improve real-time grid management.

  2. Integration with Real-Time Markets (RTM):

    • Launched in 2020, RTM enables generators to manage deviations by trading surplus or deficit power in 15-minute intervals.

  3. Green Energy Open Access Rules (2022):

    • DSM charges for renewable energy under open access were aligned with regulations, ensuring uniform application.

  4. Battery Energy Storage Systems (BESS):

    • Encouraged as a solution to smoothen generation curves and minimize deviations.

Challenges in DSM for Solar and Wind

  1. Forecasting Accuracy:
    • Weather-dependent generation makes accurate forecasting difficult, leading to frequent deviations.
  2. Penalty Burden:
    • Stricter DSM penalties can financially strain small-scale renewable generators.
  3. Infrastructure Gaps:
    • Inadequate real-time monitoring and control infrastructure affects effective implementation.
  4. Policy Uniformity:
    • Variation in state-level DSM policies creates challenges for interstate generators.

Impact of DSM Policies

  1. Grid Stability:
    • Improved frequency control and reduced instances of grid disturbances.
  2. Enhanced Forecasting:
    • Adoption of AI and machine learning tools for better forecasting accuracy.
  3. Renewable Energy Growth:
    • DSM policies have driven technological advancements in the renewable energy sector, ensuring its integration into the grid.

Future Outlook

  1. Advanced Forecasting Tools:
    • Investment in AI-based forecasting and weather modeling to reduce deviations.
  2. Energy Storage Integration:
    • Large-scale deployment of BESS and pumped hydro storage for better deviation management.
  3. Dynamic DSM Framework:
    • Real-time adaptive mechanisms to accommodate increasing renewable energy capacity.
  4. Policy Harmonization:
    • Uniform DSM regulations across states to streamline renewable energy integration.

Conclusion

The evolution of DSM in India reflects the country’s proactive approach to integrating renewable energy into the grid. While significant progress has been made in managing solar and wind energy deviations, continued focus on advanced forecasting, storage solutions, and uniform policies is essential. Effective DSM policies will play a crucial role in achieving India’s ambitious renewable energy targets and ensuring grid reliability.


 

Location: India

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