CERC Drafts New DSM Rules for Renewables and Energy Storage

The Central Electricity Regulatory Commission (CERC) has released draft amendments to the Deviation Settlement Mechanism (DSM) Regulations, proposing major changes to deviation pricing, renewable energy treatment and energy storage integration.

The proposed amendments, which will come into force from July 1, 2026, aim to strengthen grid discipline and align the regulatory framework with evolving power market dynamics.

A key proposal in the draft regulations is the revision of the market-linked reference price used for deviation settlement. CERC has proposed replacing the existing time-block-wise weighted average Area Clearing Price (ACP) with a daily weighted average ACP across all power exchanges. The move is expected to simplify price discovery and better reflect overall market trends in deviation charge calculations.

The Commission has also proposed bringing wind and solar power sellers under the same deviation settlement framework as conventional generators. The provision will apply to projects awarded through competitive bidding with bid submission dates on or after January 1, 2027, and to other projects commissioned on or after January 1, 2029. The change marks a gradual shift toward greater market accountability for renewable energy generators.

In a significant step for energy storage, the draft introduces dedicated provisions for standalone battery energy storage systems and pumped hydro storage projects. CERC has proposed that infirm power injected into the grid from first synchronisation until successful completion of trial runs be compensated at normal deviation rates, subject to a ceiling of ₹2 per kWh. For pumped hydro storage projects, deviation charges will be linked to the applicable energy charge rates specified under tariff regulations.

The proposed amendments also expand the scope of infirm power provisions to explicitly cover standalone energy storage systems, providing greater regulatory clarity during the testing and commissioning phase of such projects. This is expected to support the growing role of storage assets in India's evolving power system.

Further, CERC has proposed changes to the settlement of deviation charges by removing the existing requirement for payments within 10 days of issuance of deviation statements. Payment timelines will instead be governed by procedures under the National Deviation and Ancillary Services Pool Account framework, enabling a more streamlined and centralised settlement process.

The Commission has invited stakeholder comments on the draft regulations before finalising the amendments. The proposed changes are seen as an important step toward integrating renewable energy and storage technologies more effectively into India's power market while enhancing operational efficiency and grid reliability.