15 Jan, 2020
Streamlining Forecasting, Scheduling and DSM Regulations for Wind in India
5 mins read | CEF Analysis

India is committed to commissioning 160 GW of wind and solar power plants by 2022. To accelerate deployment, several policies have been designed and implemented to create a conducive environment for power generated from renewable energy sources. One of the key support regulations is the ‘must run’ status accorded to renewable energy power plants which mandates grid operators to absorb 100 per cent of the power generated. However, renewables and other power plants have been curtailed in case grid stability is threatened. Currently with an installed capacity of 83.4 GW of grid interactive power, India ranks 5th globally in installed renewable energy capacity. [1] However, installed capacity is only as good as the power it generates and its contribution to the electricity mix. Given the intermittent nature of renewable energy generation (due to its dependence on weather), it can potentially have a much greater adverse impact on the stability of the grid than conventional energy sources.

The grid disturbance and blackouts of 2012 resulted in a tightening of regulations, and the grid has to now operate at frequency lying between 49.95 to 50.05 Hz. Maintaining constant frequency is important for reliable and secure operations of the grid. With increasing share of renewables in the grid, it has become important to have forecasting, scheduling and deviation settlement mechanism (DSM) regulations for solar and wind power plants in India. These provisions provide visibility in the quantum of electricity injected into the grid from renewable energy sources and also regulate the market by penalising deviation from the scheduled generation beyond the permissible limit. Thus, in its original form, these regulations provide for both preventive and protective measures to facilitate large scale grid-integration of renewable energy sources. In 2015, the Central Electricity Regulatory Commission (CERC) shared model regulations. However, till date, only 15 State Electricity Regulatory Commissions (SERCs) have designed policies for their states. On analysis of these state regulations, we found a few inherent flaws.

Power producers have to forecast their generation and submit a schedule to their respective load dispatch centres which can be revised when needed. For instance, in 10 out of 15 states, both solar and wind power plants are allowed to revise their schedules 16 times a day, despite wind power plants being operational throughout the day as compared to solar which operates during day time only. At 12:15 am on 8th September 2019, the share of wind energy in the grid increased to 85 per cent in Karnataka. With such high shares of the total energy mix (especially during monsoon), it becomes critical to forecast and schedule wind energy to ensure grid stability. Any excess or under generation can lead to imposition of penalties or curtailment by grid operators. This risk is particularly rampant in states like Tamil Nadu and Rajasthan which have experienced wind energy curtailment up to 50 percent and 45 percent respectively. [2] Given the developers factor in ‘must run’ status in their financial models, they are adversely affected as they have to bear DSM penalty for over/under injection and at the same time bear the risk of technical curtailment. This not only sends poor signals to investors but also makes several existing wind energy projects financially unviable.

Error Band Percentage

From the above context, it is clear that steps must be taken to streamline the current regulatory and policy framework of forecasting and scheduling failing which grid integration of renewable energy will become a big challenge. It is true that grid stability is of utmost importance but at the same time developers should also not be unduly penalised for natural causes beyond their control. Erroneous forecasting and scheduling due to varied weather conditions, and ambiguity and inconsistency in the DSM regulations across states have created challenges for many generators. For example, there exists inconsistency in the permissible error band across states. Most states permit error of (+/-) 15 per cent deviation without penalty while in a few states, the error band is limited to (+/-) 10 per cent. Even in the same region, states permit a variety of error bands. For example, Maharashtra permit an error band of (+/-) 15 percent while Gujarat permits an error band of (+/-) 12 per cent for wind developers. In this regard, one might question the setting of these error bands and why they vary across states? Further, stakeholders suggest that the error band of (+/-) 10 per cent is extremely difficult to achieve (particularly for wind) even with the most advanced forecasting methodologies. Tamil Nadu which has the highest installed capacity of wind power (9.2 GW as of October 2019) has permitted only 10 per cent error without penalty. [3] Thus, rationalisation of error band is important to prevent developers in few states from undue penalty.

Number of Revisions

The restriction in the number of revisions in the schedule is another point of contention in the DSM regulation for renewable energy since the same does not exist for conventional energy. A restriction of maximum 16 revisions (once in 1.5 hours ahead forecast) in 24 hours excessively penalises the renewable energy developers particularly in high variation season like monsoon or during low wind season, when in spite of having the accurate forecast, the developers are unable to revise the schedule due to regulatory restrictions. Such intermittency may not impact the grid stability since it is location specific but can have significant cost impact on the developers.

Way Forward

The forecasting, scheduling and DSM regulations were designed to regulate individual behaviour so that grid stability is maintained, but the design of the regulations is such that it puts excessive penalty on renewable energy developers for causes beyond their control. This needs to be streamlined and we suggest the following way forward:

  • Currently, in most regulations, the deviation charges for solar and wind generators supplying power within the state are levied at a fixed rate. In consultations with the stakeholders, we found that this mechanism is particularly unfair as the PPA tariffs have declined considerably and therefore the DSM penalty levied makes several new renewable energy projects unviable. To correct for this market failure, we suggest that the DSM charges may be levied as a certain percentage of the PPA tariff or a fixed rate, whichever is lower.
  •  Achieving high accuracy in forecasts at small pool substation (PSS) level (a pooling substation size varies from 5 MW to >500 MW) is impossible even with advanced forecasting models and high-quality data. This variation is penalised by the regulation but at the same time such variation does not have any impact on the grid as most RE rich states have > 10,000 MW grid. Allowing aggregation of forecasts and deviation settlement at boundary (currently allowed by Karnataka and Andhra Pradesh) can lead to higher accuracy for day-ahead forecasts, and thus may also lead to better grid operations and planning at discoms’ end.
  • The DSM charges become applicable from the first day of operation. For a new project, forecasting is difficult due to paucity of historic weather and generation data. Keeping this challenge in mind, we suggest levying of DSM charges in a gradual manner so that enough breathing space is provided for a new project. This can be done in the following manner:

Lastly, while this may not require regulatory intervention, enabling policies must be formulated for granular level data sharing between weather forecasting agencies such as the India Meteorological Department (IMD) and power generators. Further, deployment of more flexible conventional generation fleet which allows bundling of power with unused or underused thermal assets should be explored. With increased share of wind and solar power in the grid and decrease in energy storage costs, we expect new business models to evolve incorporating usage of mechanical, hydro, and electro-chemical storage technologies.

In 2019, the maximum instantaneous solar and wind share was 19.4 per cent in the Indian grid and 47 and 24 per cent in southern and western regional grids. With more plants under construction in these regions, instantaneous share of renewable energy will only increase going forward. Clear and consistent regulations across the country will ensure that electricity generated from both solar and wind is absorbed by the grid and developers are not penalised for reasons beyond their control.

Annexure

Table1: Summary of DSM regulations across states

Source: CEEW-CEF Analysis


Do you agree with the above analysis? What should be the way forward? Share your views and comments on the above CEF analysis at cef@ceew.in

Note – This analysis has already been published on Indian Wind Turbine Manufacturers Association magazine “Indian Wind Power”, October-November, 2019.

References

Disclaimer

"CEF Analysis” is a product of the CEEW Centre for Energy Finance, which explains real-time market developments based on publicly available data and engagements with market participants. By their very nature, these pieces are not peer-reviewed. CEEW-CEF and CEEW assume no legal responsibility or financial liability for the omissions, errors, and inaccuracies in the analysis.2019.

Filled under: Clean Energy Finance , Policy & Regulation , Power Markets , Renewables
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