Less than three weeks after the Central Electricity Regulatory Commission’s (CERC) new regulation de-linked deviation charges and frequency, grid frequency swung wildly and dangerously on December 20, which spooked the power industry and launched a debate on the impact of the regulatory change to the health of the grid.

A significant drop or rise in frequency could lead to a blackout.

Concerned about the security of the grid, the Commission has reverted to a frequency-linked deviation settlement mechanism (DSM) as an interim measure to protect grid stability.

Before the new regulation, maintaining a healthy grid frequency was monetarily productive for all stakeholders. The earlier regulation imposed penalties and incentives on power producers and consumers alike, which ensured that the grid frequency did not fluctuate dangerously.

However, the Commission revised the deviation settlement mechanism (DSM) framework, which has now linked deviation charges to time-block-wise prices discovered in the day-ahead market (DAM), real-time market, and ancillary services market.

The clear and sharp jump and fall of all India frequencies up to 0.5 Hz can be seen in the chart below.

*Permissible frequency range per CERC IEGC Regulation is 49.90 -50.05 Hz

A top executive of an energy solution company said, “When the demand exceeds the generation, the frequency tends to go down. Basically, this can be traced back to the new DSM regulations. The impact of DSM is very high and could change how people are scheduling power.”

He added that frequency fluctuations could recur, and the Commission must work with Grid-India to ensure grid stability.

Regulator’s rationale for new mechanism

Arguing for the new mechanism, CERC had said the old system was not a reliable indicator of whether the electricity generation was short or surplus. There is little opportunity to profit from price arbitrage using frequency, it said.

Speaking to Mercom, founder of a top renewable energy management company, said, “The earlier frequency-linked tariff had a barrier where both generators and buyers had to respond based on grid frequency.”

For instance, earlier, if a power producer scheduled 1 GW but injected 2 GW into the system, the entity would be penalized for the excess energy based on the frequency. The earlier price signals originated from frequency-linked power tariffs,

“Stakeholders won’t bother about frequency, and they’ll look at other price signals that have nothing to do with frequency. The deviation can be compounded because of the changing regulations,” another industry source said.

Further, the Commission had based its decision on the introduction of ancillary services, which made the linkage of DSM price to frequency largely redundant. While ancillary services are deployed centrally by the system operator to restore and maintain system frequency closer to 50 Hz, the frequency-linked DSM price is a decentralized tool for controlling frequency.

Another reason cited by CERC was that the discipline in the grid had discouraged power distribution companies from waiting for the high-frequency period to draw power as the prices would dip very low during the period. But with grid frequency being maintained mainly within the recommended band, even the DISCOMs couldn’t take advantage of the price arbitrage.

However, de-linking the frequency without a transitionary phase has repercussions on the Indian grid.

“The grid is like a flywheel where the speed will increase if more energy is added. If people are not encouraged to consume more when the speed is high, the frequency will not return. There must be some linkage between deviation and frequency if we want to operate in a loose pool system, or we should move towards the European market design, where everyone must operate at a mandated frequency,” another source said.

A comparison of frequency trajectories

A comparison of the frequency profile is below, which juxtaposes three different periods. December 1, 2022, to December 20, 2022, vs. November 1, 2022, to November 20, 2022 (to assess the immediate effect of the implementation of the new regulation) and December 1, 2021, to December 20, 2021 (to see the impact of the season)

The chart clearly shows the impact of regulation in the December 1 to December 20 period compared with other more controlled periods during previous regulations.

CERC reported that the sudden increase in the amount of renewable energy in the power grid could reach up to 50%, which may cause problems with inertia. This would affect the drop in frequency that occurs immediately after a significant disruption (inertial response) and before the primary response takes effect.

While changing the regulations to adapt to market conditions is important, grid security must remain sacrosanct.