The CERC has initiated a suo-moto proceeding to determine the value of “X” in the deviation formula applicable to Wind and Solar (WS) Sellers under the Deviation Settlement Mechanism (DSM) framework effective from 1 April 2026. 

This submission by Prayas (Energy Group) evaluates the implications of varying values of “X”, the impact of pooling of renewable generators, and the proposal regarding non-payment for over-injection during high-frequency conditions. The analysis is based on detailed 15-minute DSM data for FY 2023-24 and FY 2024-25 covering over 70% of ISTS-connected solar and wind capacity in the Western and Southern regions.

Key Findings and Recommendations

1. Impact of tightening DSM tolerance bands – The reduction of tolerance from ±10%/±15% to ±5%/±10% will increase deviation-linked penalties. Without pooling, the proportion of time blocks within permissible limits may fall by 20–30%.
2. Effectiveness of pooling – Aggregation of projects at the pooling-station level smooths generation variability, increasing compliance within tolerance limits and reducing penalties by 30–65% at (X=100).
3. Sensitivity to “X” – As “X” decreases from 100 (available capacity basis) to 0 (scheduled generation basis), penalties rise steeply—especially for wind projects. Pooling moderates these effects but benefits diminish as “X” falls below ~60%.
4. Differentiated and phased approach – Empirical analysis supports a graduated shift towards schedule-based deviation computation:
   • FY 2026–28: X = 40–50% for solar and 60–70% for wind.
   • From FY 2028 onwards: full transition (X=0), aligning with TNERC’s approach and CERC’s proposed treatment for new WS projects.
5. High-frequency over-injection – Frequency ≥50.05 Hz occurred ~9.5% of the time in FY 2025, but energy affected was under 1% of total generation, implying negligible revenue impact. The proposed rule therefore strengthens grid security without significantly impacting revenue. DSM regulations should be amended to include this proposed change.
6. Pooling and 100 MW deviation cap – As WS sellers are progressively aligned with General Sellers, pooling of large RE stations (≥1000 MW) under a ±10% or 100 MW cap requires reconsideration to ensure equitable treatment.

The detailed comments and suggestion can be found in attached document on the page.