The Central Electricity Regulatory Commission (CERC) has reverted to frequency-linked deviation settlement mechanism (DSM) as an interim measure to protect grid stability which has been under pressure over the last three weeks owing to a change in regulations.

The grid frequency deviated dangerously away from the acceptable range of 49.90 -50.05 Hz. It oscillated from 50.5 Hz and 49.41 Hz on December 20.

The Commission, in its order, inserted provisions of the older mechanism that would override the latest regulations until such time amendments are made in the 2022 regulations.

The commission had revised the DSM framework to delink frequency and link deviation charges to the prices observed on market platforms in the day-ahead market (DAM), real-time market, and ancillary services market during a particular time slot.

It also directed Grid-India to provide weekly reports on frequency fluctuation causes, primary and automatic gain control responses from generating stations, efforts to obtain and deploy secondary reserve ancillary service (SRAS) and reserves regulation ancillary services (RRAS) to control frequency, and any remedial measures taken.

These new rules will take effect at midnight on December 28, 2022. They will remain in place until further notice from the Commission.

“The normal rate of charges for deviations are now capped at ₹12 (~$0.15)/kWh. The frequency-linked DSM is back – albeit partially now. The broader question is – the regulatory provisions are extremely nonlinear for over and under-injections. Sellers and buyers would always strive to reduce the DSM payments. RRAS and SRAS would still be critical to watch out for and would determine how the stakeholders (buyers and sellers) respond to the grid plus ancillary market,” said Vishal Pandya, Cofounder, REConnect Energy.

The Commission’s order noted instances where the frequency has been outside the desired range of 49.90 Hz to 50.05 Hz due to both over-injection and under-drawal occurring at different time slots.

To address this issue, general sellers (except for run-of-river generating stations or generating stations based on municipal solid waste) will not be paid from the deviation and ancillary service pool account for over-injection in time blocks where the system frequency is 50.05 Hz or higher.

Further, the order said that when system frequency falls below 49.90 Hz in a certain time block, the general seller will receive 150% of the reference charge rate for excess injection deviation from the deviation and ancillary service pool account during that time block, regardless of volume limits.

General sellers will pay back to the deviation and ancillary service pool account for any shortfall in energy due to under-injection in any time block at 50% of the reference charge rate.

Buyers will be paid back from the deviation and ancillary service pool account for under-drawal in time blocks where the system frequency is 50.05 Hz or higher.

The deviations are attributed to entities scheduling more energy production or consumption than necessary and capacity shortages during peak times. These issues, along with under-injection by generators and over-withdrawal by distribution companies, have made it difficult to use secondary reserve ancillary services and reserve regulations to manage large frequency fluctuations.

As a result, the system frequency and applicable DSM rates have often remained high, and the system operator has occasionally had to use gas generation based on regasified liquefied natural gas to address capacity shortages for ancillary services.

CERC has capped deviation charges at ₹12 (~$0.15)/kWh due to instances of high charges (nearly ₹ 40 (~$0.48)/kWh) resulting from the use of costly ancillary services. These high charges can discourage over-drawing or under-injecting, but they can also incentivize under-drawing or over-injecting if the deviation charge is linked to the normal rate.

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