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MNRE Pushes for Separate DSM Rules for Wind and Solar to Safeguard Renewable Energy Viability

The Ministry of New and Renewable Energy (MNRE) has urged the Central Electricity Regulatory Commission (CERC) to introduce technology-specific Deviation Settlement Mechanism (DSM) norms for wind and solar power projects, cautioning that a uniform framework across all generation sources could increase financial risks for renewable energy developers and impact project viability.

In its response to the draft Deviation Settlement Mechanism and Related Matters (Third Amendment) Regulations, 2026, the ministry stated that renewable energy generation is fundamentally dependent on weather conditions and therefore cannot be assessed under the same deviation settlement framework as conventional thermal or hydro power plants. It warned that applying uniform DSM charges across wind, solar, and conventional generators could expose developers to higher uncertainty, potentially increase tariffs, and weaken the bankability of future renewable energy projects.

The MNRE has proposed a graded and technology-specific DSM framework that takes into account the operational realities of renewable energy systems. This includes factors such as the maturity of forecasting and scheduling tools, the role of Renewable Energy Management Centres (REMCs), availability of energy storage systems, ancillary services markets, and the overall readiness of the power grid to handle variable renewable generation.

The ministry also recommended that smaller renewable energy generators be granted exemptions or a longer transition period to comply with the revised DSM framework. It further suggested incorporating weather variability considerations into deviation calculations and allowing developers to manage deviations through self-procurement mechanisms or third-party services, including support from entities such as Grid-India, to reduce compliance stress.

Additionally, the MNRE emphasized that a differentiated DSM structure would better reflect the technical characteristics of renewable energy projects while ensuring financial stability for developers. According to the ministry, such a framework would be crucial for maintaining investor confidence, preventing unnecessary tariff escalation, and supporting India’s broader objective of accelerating the transition toward a cleaner and more flexible power system.

The proposal comes at a time when India is rapidly expanding its renewable energy capacity, with wind and solar expected to play a central role in achieving the country’s long-term clean energy targets. As grid integration challenges grow alongside higher renewable penetration, policy alignment between regulatory mechanisms and the operational nature of renewable technologies is becoming increasingly important for ensuring both stability and growth in the sector.