Key Takeaways
- The MNRE has urged for a separate Deviation Settlement Mechanism for renewable energy projects, distinguishing them from conventional power plants.
- New regulations may increase financial risks for renewable projects by aligning them with traditional electricity sellers.
- The ministry requests specific exemptions for smaller renewable generators and flexible mechanisms to manage deviations.
MNRE Advocates for Separate DSM for Renewable Energy
The Ministry of New and Renewable Energy (MNRE) has presented a strong case to the power regulator to maintain a distinct Deviation Settlement Mechanism (DSM) for renewable energy sources, specifically wind and solar projects. The ministry asserts that these renewable generators should not be categorized similarly to conventional power plants due to their inherently variable output, which is dependent on weather conditions.
In its feedback on the draft Deviation Settlement Mechanism and Related Matters (Third Amendment) Regulations, 2026, the MNRE emphasized that traditional sources, such as thermal power plants, provide a controllable level of electricity, unlike renewables. The proposed amendments intend to treat future wind and solar generators on par with other electricity providers regarding DSM charges, while also attempting to adjust the benchmarks for certain contract-rate calculations.
For context, DSM functions as a framework that imposes financial penalties on both generators and distribution companies if there are deviations between scheduled versus actual electricity supply or demand from the grid. The MNRE cautioned that integrating renewable energy sources into the same DSM framework would significantly elevate financial risks, adversely impacting the bankability of projects, and compel developers to account for greater uncertainty in their tariff pricing.
The ministry has proposed retaining a technology-specific DSM approach for renewable projects, linking any deviations to the capacity available and the effectiveness of forecasting systems. It also advocates the establishment of renewable energy management centers, enhanced scheduling platforms, and ancillary markets, along with storage options for better performance.
Furthermore, the MNRE seeks exemptions or an extended transition period specifically for smaller renewable energy generators. The ministry urges for the implementation of weather-based DSM calculations and enhanced flexibility for developers to manage deviations, including options for self-purchasing or using third-party mechanisms such as Grid India.
By reinforcing these suggestions, the MNRE aims to create an environment that fosters growth in renewable energy sectors while minimizing the financial risks associated with their operational variability.
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