India’s MNRE pushes for separate DSM rules for PV and wind projects, warns of financial risks

It warned that imposing conventional DSM obligations on renewable generators would expose developers to higher financial uncertainty, weaken project bankability and force companies to price additional risk into future tariffs.

The draft amendments, issued by the CERC in June, propose bringing future wind and solar generators under the same DSM framework as conventional electricity sellers. The proposed changes would also alter the benchmark used to calculate certain contract-rate deviations.

DSM is a set of rules that requires power generators to compensate for differences between the amount of electricity they are scheduled to supply and what they actually deliver. The system is designed to help keep the electricity grid stable and balanced.

India introduced DSM rules in 2014 and later created separate rules for solar and wind projects because their electricity output depends on weather conditions. As more renewable energy has been added to the grid, regulators have gradually tightened forecasting and scheduling requirements to improve grid reliability and encourage the use of battery energy storage systems to manage fluctuations in power generation.

“Uniform DSM norms can improve grid discipline and create a level playing field. However, treating renewable energy like conventional power may increase project risks and investment costs unless the rules account for the natural variability of wind and solar,” Gaurav Upadhyay, energy finance specialist for India sustainable finance in South Asia at IEEFA told PV Tech.

Instead, the ministry has recommended retaining a technology-specific DSM regime that reflects the operational characteristics of renewable energy. It proposed a graded framework in which deviation limits are linked to available generation capacity and the maturity of supporting infrastructure, including forecasting systems, Renewable Energy Management Centres (REMCs), scheduling platforms, ancillary service markets and energy storage.

The ministry has also called for exemptions or a longer transition period for smaller renewable energy projects, weather-adjusted DSM calculations and greater flexibility for developers to offset deviations through self-purchase arrangements or third-party mechanisms.

The proposed intervention comes as India continues tightening scheduling and forecasting requirements to accommodate rapidly growing renewable energy capacity while maintaining grid reliability.

Under the draft amendments, wind and solar projects awarded through bids from 1 January 2027 and commissioned from 1 January 2029 would be treated similarly to conventional generators under DSM regulations.

The draft rules would also change how deviations are measured. Instead of comparing a project’s actual output with its available generating capacity, deviations would be measured against the amount of electricity it had scheduled to deliver. The proposed changes would also gradually reduce the margin for forecasting errors over time.

Other proposed amendments include changing how deviation charges are calculated, introducing separate DSM rules for standalone energy storage systems, and updating the timeline for settling deviation payments.

The story has been updated to include comments from Gaurav Upadhyay.