Designing deviation settlement mechanisms for wind energy in India: balancing forecast accuracy, fairness and grid stability"

India’s electricity sector is undergoing a major transition as the country charts a path towards a low-carbon future. Weather-dependent renewable sources, including wind and solar, as well as hydropower, are central to this shift. Globally, renewable electricity has witnessed exponential growth in installed capacity in recent decades, accounting for 44% (solar) and 38% (wind) of total installed renewable capacity in 2024. Although renewable sources have lower capacity utilisation factors than fossil-fuelled sources, their contributions to the total electricity generation – 8.1% from wind and 6.9% from solar – are no longer negligible. In this context, India is emerging as a global leader in renewable electricity, ranking as the world’s third-largest generator of electricity from wind and solar combined.

As wind generation exhibits significantly greater variability in India than other renewable resources such as solar, this commentary focuses on the evolving policy landscape in India surrounding wind energy forecasting, particularly the design of deviation settlement mechanisms (DSMs). These mechanisms are intended to incentivise forecast accuracy, reduce system balancing costs, and align incentives for renewable developers with the operational needs of grid operators. Striking the right balance in DSM design is crucial for supporting grid stability and promoting renewable energy growth.

The Central Electricity Authority projects that India’s installed wind capacity will nearly double to 100 GW by 2030. This rapid expansion poses substantial operational challenges for grid managers, primarily owing to the variability and intermittency of wind power generation. Unlike thermal power, which can be dispatched on demand, wind power fluctuates across timescales – from minute-wise to inter-annual – creating hurdles for aligning power generation with real-time demand. Such alignment is necessary to avoid grid instability, frequency excursions and in extreme cases, blackouts.

Ashwin K. Seshadri also co-authored the paper.

Click here to read more