India’s renewable energy sector is entering a period of tighter grid discipline as wind and solar capacity expands. Forecasting errors under the Deviation Settlement Mechanism (DSM) could have a growing commercial impact, with revised rules increasing the financial consequences of differences between scheduled and actual generation, ratings agency Crisil said. The Central Electricity Regulatory Commission’s (CERC) revised DSM Regulations came into force on 1 April 2026. The framework is intended to improve alignment between scheduled and actual generation and support grid security and stability. Under the earlier system, deviations for renewable generators were calculated against available capacity, giving them greater flexibility than conventional generators, whose deviations were assessed against scheduled generation. The revised rules introduce a phased move towards using scheduled generation as the denominator. This means the same generation shortfall will produce a larger deviation percentage, while the difference between actual and scheduled generation remains unchanged. Crisil said the resulting charges could reduce project cash flows and lower the internal rate of return (IRR) by 50 to 100 basis points, making DSM an important credit-monitoring factor. The revenue-neutral tolerance band (RNTB), which permits deviations without a DSM penalty, has also been narrowed. For solar and wind-solar hybrid projects, the band fell from ±10 per cent to ±5 per cent from 1 April 2026. The limit for wind projects declined from ±15 per cent to ±10 per cent because of the greater volatility associated with wind generation. A solar project with a deviation of -5.3 per cent in FY32 would therefore incur a penalty under the new framework, whereas it would not have done so under the earlier tolerance band. DSM payments may reduce revenue or raise operating costs, weakening cash flows and debt-servicing cushions. Developers using storage to offset deviations would face additional capital expenditure, while project debt service coverage ratios could decline by up to 0.05 times. Crisil said pooling power from multiple wind and solar generators at a common pooling station could help moderate the impact and support the integration of a larger renewable energy share into the grid.