CERC sets phased X-factor reduction for RE deviation, keeps FY27 unchanged

The Central Electricity Regulatory Commission (CERC) has finalised a phased reduction trajectory for the “X” parameter used to compute deviation percentages for wind and solar generators, introducing differentiated timelines for the two technologies while retaining the existing methodology for FY 2026–27.

The order, dated March 31, 2026, resolves a key issue left open under the CERC (Deviation Settlement Mechanism and Related Matters) Regulations, 2024, how to transition the deviation formula denominator from available capacity to scheduled generation.

Under the revised framework, deviation percentage will be calculated using a blended denominator comprising X% of available capacity and (100–X)% of scheduled generation. With X at 100, the current methodology continues; as X declines to zero, deviation is measured entirely against scheduled generation, progressively aligning renewable generators with the scheduling discipline applicable to conventional sources.

CERC has set X at 100% for FY 2026–27 across all projects, resulting in no change in deviation computation in the first year. Thereafter, separate trajectories apply. For solar and wind-solar hybrid projects, X will decline to 90% in FY 2027–28, followed by 75%, 55%, and 30%, reaching zero from April 2031. Wind projects will follow a slower path, with X reducing to 95%, 85%, 65%, and 35% over the same period, before reaching zero in April 2031.

The Commission cited higher forecasting uncertainty in wind generation as the basis for differentiated treatment. Its approach draws on Grid India’s simulation study, with similar trends reflected in independent analysis by Prayas Energy Group based on 15-minute DSM data covering a majority of ISTS-connected capacity.

The decision follows a consultation process involving 46 stakeholders and a public hearing held in December 2025. Renewable developers and industry bodies, including NSEFI and IWPA, raised concerns over inadequate forecasting infrastructure and the limited dataset underpinning the proposal. Several submissions warned that a transition toward schedule-based deviation could materially erode project returns, with NSEFI estimating internal rate of return reductions of up to 5.5 percentage points for solar-hybrid projects and up to 24 percentage points for wind under high deviation scenarios. Some developers also argued that the change should qualify as a change-in-law event.

In contrast, distribution companies and system operators supported a faster transition. Submissions highlighted that forecasting and scheduling obligations have been in place since 2015 and pointed to state-level precedents, including Tamil Nadu’s shift to schedule-based deviation accounting from April 2024.

CERC grounded its decision in system stability concerns. Data from Grid India showed that on May 25, 2025, system frequency remained above 50.05 Hz for around 30% of the day, with sustained high-frequency conditions during solar generation hours. Data from Karnataka SLDC for FY 2024–25 indicated wind deviations exceeding 250 MW more than 60% of the time and solar deviations of similar magnitude in 37% of instances. The Commission also noted that renewable generation reached a record 51.5% share on July 29, 2025, increasing the system impact of forecasting errors.

The order applies to both existing and new projects. CERC observed that the transition had been signalled in advance through the DSM Regulations, 2024, and that retaining X at 100% in the first year provides additional adjustment time.

In a related direction, the Commission has proposed that no payment be made to wind and solar generators for over-injection during periods when system frequency is at or above 50.05 Hz, as part of amendments to the DSM framework aimed at curbing grid stress during high-frequency conditions.

The order remains subject to the outcome of writ petitions pending before the Delhi High Court challenging the DSM Regulations, 2024. The Commission noted that no coercive action will be taken while the interim relief granted by the court continues.

CERC has also directed NLDC to develop a procedure, in consultation with regional power committees, to address deviation computation in time blocks where scheduled generation is very low, particularly relevant once X reaches zero.

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