Renewable energy presents both opportunities and challenges. While it contributes positively to the energy supply, a high reliance on renewable sources poses significant challenges for grid operators.
As of now, the total installed capacity for wind and solar energy stands at 188 GW, accounting for 38 percent of the overall power capacity of 490 GW. Notably, conventional sources contributed to around 50 percent of renewable energy generation in July 2023, totaling 54.5 billion kWh, while conventional generation amounted to 112.16 billion kWh.
The variability of renewable energy generation, especially wind and solar, complicates grid management as the demand for electricity remains constant. To tackle this unpredictability, authorities have mandated renewable energy generators to forecast their power output in 15-minute intervals for the following day, imposing penalties for discrepancies.
The deviation settlement mechanism (DSM) has become a contentious issue between renewable energy developers and grid operators. While both parties recognize the challenges each faces, developers argue against being penalized for natural variations in weather. In contrast, regulators maintain their position, citing the need for grid stability.
Compounding the issue, the Central Electricity Regulatory Commission (CERC) plans to tighten the tolerance bands for deviation, reducing them from 10 percent to 5 percent for solar and wind-solar hybrid systems, and from 15 percent to 10 percent for wind systems, starting April 1, 2026. This proposal has been met with discontent from developers.
A study by Grid-India Ltd covering deviations over 41 weeks from September 16, 2024, to June 29, 2025, highlighted the challenges in adhering to the current no-penalty tolerance band.
In an effort to improve conditions for developers, the CERC recently proposed modifications to the calculation of deviations in a draft notification released on September 10. This includes transitioning to station-level aggregation of forecasts instead of assessing individual generation units.
The revised formula aims to gradually eliminate the ‘available capacity’ element from the deviation calculations. Currently, the formula assesses deviation as the difference between scheduled generation and actual generation, calculated as a percentage of scheduled generation plus a fraction of available capacity. The new approach would focus solely on major gaps from scheduled outputs.
Additionally, the CERC has suggested that integrating schedules at the pooling station level through a qualified coordinating agency could mitigate individual fluctuations in generation, thereby reducing overall deviations.
The draft notification indicates that the regulator expects renewable energy developers to enhance their forecasting accuracy and adhere to their schedules. The CERC asserts that future intermittent generation from wind and solar must be managed through improved forecasting, scheduling, and operational experience, expecting new projects to demonstrate the same compliance levels as conventional generators.
Furthermore, regardless of the tolerance bands, if developers inject excess power into the grid beyond their forecasts during times when grid frequency exceeds 50.05 Hz, they will not receive compensation for this surplus generation. The CERC notes that with the rapid commissioning of renewable capacity, the challenges in real-time grid operations are becoming increasingly significant.
Published on September 15, 2025.
