RAIN OR SHINE. Generation forecasting plays a major role in maintaining renewable-powered grid stability | Photo Credit: aydinmutlu

One of the biggest regulatory headaches for the renewable energy industry — the stringent Deviation Settlement Mechanism (DSM) rules that penalise wind and solar generators for failing to match their generation forecasts — may soon ease a bit.

The Ministry of New and Renewable Energy (MNRE) is considering allowing developers to revise their generation forecasts much closer to the time of actual electricity delivery, which the industry believes could significantly reduce penalties. MNRE Secretary Santosh Sarangi told businessline that the government was examining a proposal to relax the timeline for forecast revisions.

At present, renewable energy generators can revise their schedules several times during the day, but the final revision must be submitted 90 minutes before the 15-minute delivery block. The proposal is to reduce this to about 45 minutes.

The changed timeline could make a substantial difference because weather forecasts become progressively more accurate closer to the time of generation. For instance, instead of freezing the schedule for the 10–10.15 am block at 8.30 am, developers may be able to revise it until around 9.15 am, improving forecast accuracy and reducing deviations.

The issue has assumed significance as India rapidly expands renewable capacity. The country has installed about 110 GW of solar and over 55 GW of wind capacity, and targets 500 GW of non-fossil electricity capacity by 2030.

With the growing spread of renewable energy, grid stability would increasingly depend on accurate forecasting.

Commercial impact

Under the DSM framework, renewable generators must submit generation schedules in 15-minute intervals for the following day. Significant deviations attract commercial consequences.

The original framework allowed a wider deviation band. However, the Central Electricity Regulatory Commission’s 2024 DSM regulations, which took effect in phases from April 2026, tighten the tolerance limit to plus- or minus-5 per cent for solar and hybrid projects and plus- or minus-10 per cent for wind projects, making compliance considerably more demanding.

Developers say the tighter norms expose them to substantial financial risk because renewable generation ultimately depends on weather conditions, which cannot be perfectly predicted.

According to industry estimates, DSM-related penalties could shave off as much as 10 per cent of project revenues in adverse conditions.

The industry has challenged the regulation before courts. While the Karnataka High Court has granted interim relief in one of the petitions, developers remain apprehensive, particularly due to the proposed retrospective application of some provisions.

Their principal demand is that any tightened norms should apply only prospectively.

Not everyone agrees that the rules are unreasonable.

Alok Kumar, former power secretary and now Director General of the All India Discoms Association, argues that renewable generators have had ample time to improve their forecasting systems.

“The industry always creates a hulla whenever tighter discipline is introduced,” Kumar told businessline. Unless developers face commercial consequences, there will be little incentive to invest in sophisticated forecasting tools, he said.

Grid vs generators

Accurate forecasting is essential because unexpected swings in renewable generation force grid operators to arrange balancing power at short notice, increasing costs and complicating grid operations.

With renewable energy accounting for an ever-growing share of India’s electricity mix, forecasting errors can have wider implications for grid security.

Developers acknowledge the need for grid discipline but contend that wind and solar generation can never be forecast with complete precision. They argue that a shorter gate-closure period represents a practical compromise — one that improves forecast accuracy without diluting the objective of maintaining grid stability.

For now, that appears to be the government’s preferred middle path.

By allowing forecasts to be updated closer to real time, the Centre hopes to reduce unnecessary penalties while preserving the scheduling discipline that an increasingly renewable-powered grid demands.

Published on July 6, 2026