The Central Electricity Regulatory Commission (CERC) has approved and notified the CERC (Deviation Settlement Mechanism and Related Matters) (Third Amendment) Regulations, 2026. Formally issued on August 25, 2026, the amended regulations came into force across India’s national power grid on August 31, 2026. The regulatory update aligns specified future wind and solar projects with conventional generators under the General Seller deviation charge framework, while establishing explicit rules for standalone energy storage systems (ESS) and pumped hydro storage projects (PSP).
CERC cited the expanding footprint of renewable energy across the national grid—noting that variable renewables reached a 51.5% share of the electricity generation mix on July 29, 2025—and the resulting necessity for enhanced grid scheduling discipline. The Commission highlighted that renewable energy has matured after benefiting from a relaxed regulatory framework for over a decade, which included broad tolerance bands, relaxed deviation treatment, and delinking from grid frequency. This regulatory tightening is supported by operational advancements in the sector, including improved forecasting and scheduling technologies, hybrid project configurations, and the expanding commercial availability of energy storage.
Key Regulatory Provisions
The Third Amendment introduces several technical, structural, and pricing methodology updates to India’s Deviation Settlement Mechanism:
- Parity for Wind-Solar (WS) Sellers: Under Clause (4A) of Regulation 8, specified future WS Sellers will face deviation charges at par with General Sellers, removing historical differential treatment and subjecting variable renewable generation to frequency-linked grid discipline.
- Applicability Thresholds:
- Competitive Bidding Projects: Applies to projects where tenders or bids are submitted on or after January 1, 2027.
- Non-Bidding Projects: Applies to projects achieving Commercial Operation Date (COD) on or after January 1, 2029.
- Reference Charge Rate & ACP Methodology: CERC retained the existing time-block-wise weighted average Area Clearing Price (ACP) of the Integrated Day Ahead Market (I-DAM) as the reference benchmark. A draft proposal to substitute this with a daily weighted average ACP across power exchanges was rejected following public consultation. CERC ruled that preserving time-block pricing better reflects intra-day value variations of electricity and maintains critical economic signals required for real-time scheduling and grid balancing.
- Section 62 Pumped Hydro Storage Plants: Deviation charges for standalone pumped hydro storage plants regulated under Section 62 of the Electricity Act, 2003, will be calculated using the Energy Charge Rate (ECR) specified under Regulation 66(3) of the CERC Tariff Regulations, 2024, applicable across both generation and pumping modes. CERC clarified that Section 62 standalone PSPs lack a conventional Contract Rate or Reference Charge Rate because their annual fixed costs are recovered through capacity charges, while charging energy is arranged by beneficiaries. CERC indicated this PSP provision may be reviewed after two years of operational implementation experience.
- Pre-Commissioning Infirm Power Compensation: Testing and synchronization power injected into the grid from standalone ESS prior to successful completion of trial runs will be compensated at the Normal Rate of Charges for Deviations for the respective time block, subject to a ceiling of ₹2 per kWh. While storage developers advocated for a higher ceiling to cover energy consumption and round-trip efficiency losses during trial testing, CERC retained the ₹2/kWh cap, observing that infirm power injections are occasional and that the ceiling is necessary to balance developer cost recovery against financial burdens on the National DSM Pool Account.
- Settlement Timelines and Surcharge: CERC retained the statutory 10-day timeline for deviation payment settlements, while introducing flexibility to follow timelines specified in the Detailed Procedure for the National Deviation and Ancillary Services Pool Account once approved by the Commission. The late payment surcharge remains fixed at 0.04% per day.
Breakdown of Impacted Stakeholders
| Stakeholder Group | Specific Regulatory Impact |
| Future Wind and Solar Developers | Subject to General Seller deviation charges based on bid submission date (≥ Jan 1, 2027) or COD (≥ Jan 1, 2029), requiring project planners to integrate frequency-linked deviation liabilities into future commercial, financing, and bidding strategies. |
| Existing Wind and Solar Projects | Continue operating under the pre-existing relaxed deviation framework, preserving regulatory certainty as the amendment applies strictly prospectively without retroactive effect. |
| Standalone ESS & Pumped Hydro Operators | Gain formal regulatory recognition under DSM; Section 62 PSPs become subject to ECR-based deviation pricing across both modes, while standalone ESS face a ₹2/kWh ceiling on pre-commissioning infirm power compensation. |
| Grid Operators (Grid India / NLDC / RLDCs) | Required to establish technical operational protocols to handle pooling stations co-locating generators operating under two distinct frameworks (existing relaxed norms vs. revised General Seller rules) feeding into a single grid injection point. |
Implementation Timelines and Next Steps
The rollout of the Third Amendment framework follows a structured chronological sequence of consultation background and operational milestones:
- June 30, 2026: CERC conducted a formal public hearing following the evaluation of 41 stakeholder submissions received during the draft consultation process.
- August 31, 2026: The Third Amendment Regulations officially came into force across the national grid following statutory notification on August 25, 2026.
- January 1, 2027: Tendering and bid submission cutoff date; competitive bidding route WS projects submitted on or after this date enter the General Seller deviation charge regime.
- Prior to January 1, 2029: Grid India must develop and submit detailed operational procedures to CERC for Commission approval to manage pooling stations handling co-located sellers under both legacy and revised frameworks.
- January 1, 2029: Commercial Operation Date cutoff date; non-bidding route WS projects commissioned on or after this date enter the General Seller deviation charge regime.
Official Sources & Regulatory References
1. Central Electricity Regulatory Commission (CERC)
- CERC DSM Third Amendment Regulations, 2026 (Official Notification) — Official notification of the DSM Third Amendment Regulations, 2026[3][6].
- CERC Draft DSM Third Amendment Regulations, 2026 — Initial draft regulations issued for stakeholder consultation[1][7].
- CERC Generic Levelised Tariff Order for RE (FY 2026–27) — Generic levelised tariff determination for small hydro, biomass, and waste-to-energy projects (Order 12-SM-2026)[6][8].
- CERC Procedure for Levying Milestone Compensation Charges — Order establishing procedures for compensation charges under GNA and Connectivity Regulations (Order 5-SM-2026-F)[9][10].
- CERC Rajasthan Solar Energy Zones Augmentation Order — Tariff order for the Fatehgarh-II Pooling Station transformer augmentation (Petition 258/TT/2025)[8][9].
2. Ministry of New and Renewable Energy (MNRE)
- MNRE Amended ALMM Procedure Compliance Communication — Procedural compliance requirements under the amended Approved List of Models and Manufacturers[2][11].
- MNRE 9th Revision of ALMM List-II for Solar PV Cells — Updated List-II of approved solar PV cell models and manufacturers[11][12].
- MNRE Updated List-I for Solar PV Modules — Updated List-I under the ALMM order for solar PV module manufacturers[13][14].
- MNRE Force Majeure Advisory for RE Project Extensions — Implementation guidance for granting project timeline extensions due to qualifying force majeure events[12][15].
- MNRE Guidelines on Rooftop Solar Inverter-Level Data — Compliance requirements for collecting and retaining inverter-level generation data[15][16].
- MNRE Draft Specification for Solar Pump Controllers — Consultation document inviting public comments on solar pump controller standards[16][17].
- MNRE HRD Programme Approval (FY 2026–27 to 2030–31) — Administrative approval for renewable energy capacity building and training[18][19].
3. Central Electricity Authority (CEA) & Grid Governance
- CEA Draft Grid Connectivity Technical Standards Regulations, 2026 — Revised technical standards for grid connectivity of power plants and storage assets[4][10].
- GRID-INDIA NLDC Operating Procedure, 2026 — Operational framework for national grid operation, scheduling, and dispatch[4].
- CTUIL Solar and Non-Solar Hour Margin Declarations — Transmission access margin information under the GNA framework[5][21].
4. State Electricity Regulatory Commissions (SERCs)
- UERC Draft DSM Regulations, 2026 (Uttarakhand) — Proposed intra-state deviation settlement mechanism for Uttarakhand[22][23].
- GERC Green Energy Open Access 6th Amendment (Gujarat) — Regulations fixing banking charges and framework for green open access[24].
- KERC Grid Interactive Distributed Solar PV Regulations, 2026 (Karnataka) — Provisions for net metering, net billing, and group net metering[25][26].
- MPERC Standard Operating Procedure for Power Banking (Madhya Pradesh) — SOP defining a 3-month power banking cycle for green energy open access[27][28].
- UPERC Draft Electricity Grid Code Regulations, 2026 (Uttar Pradesh) — Proposed state grid operating code[28][29].
- PSERC Order on Digital Rooftop-Solar Net-Metering (Punjab) — Approval for digital connection agreements via PM Surya Ghar portal[30].
- APERC Waste-to-Energy Tariff Order (Andhra Pradesh) — Tariff determination for 6 MW additional WtE capacity in Visakhapatnam[22][31].
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