Availability Based Tariff

Imagine paying a fire brigade partly for actually putting out fires, but also partly just for being on standby and ready to respond at any moment, since readiness itself has value even on days nothing catches fire. Availability Based Tariff applies that same logic to power plants.

Under ABT, a generator is compensated with two separate components, a capacity charge simply for keeping the plant available and ready to generate, regardless of how much power is actually drawn, and an energy charge based on the actual electricity supplied. Critically, ABT also links payments to grid frequency discipline, rewarding generators that help keep the grid's frequency stable and penalising those that contribute to instability through unscheduled deviations.

ABT was introduced specifically to fix a period when grid frequency in India was notoriously unstable, since it gives generators and buyers a direct financial incentive to stick to their scheduled generation and consumption rather than deviating unpredictably, which keeps the entire national grid running smoothly.