Deviation settlementDSM
Settlement of the gap between scheduled and actual generation or drawal, block by block. Eligible wind and solar sellers have a revenue-neutral tolerance band: energy is still settled, but without an additional penalty. Rates and bands depend on the applicable rules.
How it works
In each fifteen-minute block, the load despatch centre compares a party's metered injection or drawal with its final schedule. The difference is its deviation for that block, in MWh. The settlement rate depends on the entity and the applicable rules, and may use contract rates or a reference linked to market and ancillary-service prices. A seller that under-injects pays for the missing energy; payment for excess injection depends on those rules too.
Eligible wind and solar sellers have a revenue-neutral tolerance band. Inside it, energy is settled at the contract rate without an additional penalty. Outside it, settlement adds a penalty on shortfalls or reduces payment for surpluses. The bands and the basis for calculating percentage deviation depend on the project category, date and applicable rules. CERC sets the framework for inter-state entities, while state commissions set rules for entities within their jurisdiction.
Why it matters
Deviation charges come straight off a renewable plant's revenue, and they grow with forecast error. A developer sizing a project needs an estimate of them per MWh, because tighter bands can turn a profitable plant into a marginal one. IPPs reduce them with better forecasting, frequent schedule revisions and, increasingly, co-located storage. Industrial buyers drawing power through open access face state-level deviation charges too, which add to their landed cost.
A worked example
To illustrate the arithmetic, take a 100 MW plant selling at ₹3.00/kWh. Assume a band of 10% of available capacity, with an additional penalty of 10% of the contract rate for the next 5% of deviation. In one block it schedules 80 MW and generates 65 MW, a miss of 15 MW. The first 10 MW is settled at the contract rate without a penalty. The next 5 MW is 5 × 0.25 = 1.25 MWh, so the additional penalty is 1,250 kWh × ₹0.30 = ₹375. This is the penalty component, on top of settlement for the missing energy; actual bands depend on the applicable rules.
Illustrative figures.
Across markets
Deviation settlement is India's form of imbalance settlement. Europe settles imbalance through balance responsible parties, usually at a single imbalance price per block derived from the cost of balancing actions. US markets settle deviations at the real-time nodal price, with few explicit penalty bands. India's framework distinguishes eligible wind and solar sellers from general sellers, with treatment changing by project category and date.
Sources
Sources checked . Sources for the inter-state tolerance-band terminology and 2026 changes. State rules and individual project applicability may differ.