Availability Based Tariff (ABT)

An Availability Based Tariff is a settlement framework that compensates generators based on their declared availability, scheduled output, and adherence to dispatch instructions. Originally pioneered in India and now referenced in several emerging markets, ABT differentiates between capacity charges for staying available, energy charges for scheduled generation, and deviation charges tied to frequency. The structure improves discipline by aligning payments with the cost of maintaining reliability.

Generators declare their day ahead availability, system operators schedule dispatch, and deviations are priced through a frequency linked mechanism that penalizes over or under generation when the grid is stressed. Load serving entities face similar deviation charges, encouraging accurate demand forecasting. The tariff therefore internalizes the value of frequency support without requiring complex ancillary service markets.

As renewable penetration increases, regulators extend ABT principles to hybrid resources and storage, defining how state of charge and ramping obligations translate into deviation settlements. Digital measurement infrastructure and automated settlement systems are critical so that participants view charges as transparent and fair.

Investors considering ABT jurisdictions must understand how deviation penalties affect merchant revenue and PPA structures. Corporate buyers with behind the meter projects also rely on ABT rules to calculate rooftop solar savings and to structure virtual power plant offerings.