The differential relay measures the phasor difference between two similar electrical quantities(voltage-voltage or current-current). The block diagram for such a relay is shown in fig 24. Inputs I and II are supplied to the comparator. The output of the comparator (phase difference of inputs I and II) is amplified and used to operate the relay.
The static differential relays are most commonly used for the protection of generators and transformers for any type of internal faults (two-and three-phase faults, earth faults with solidly grounded neutral or low resistance grounded neutral inter turn faults).

These relays are advantageous over electromagnetic differential relays as they are very compact, highly sensitive for internal faults and have absolute stability for heavy through faults, extremely short tripping times (20-50 ms) regardless magnitude of auxiliary voltage, accurate and absolutely stable tripping characteristic even for asymmetrical faults as each phase can have its own relay, low VA burden, inrush current proof characteristic even during high starting currents, inrush currents. The selection of auxiliary voltage is also easy. A permanent magnet moving coil relay is usually employed as tripping device.
The difference of the currents in the operating coil and restraining coil is fed to the output element for the relay operation. They relay operates when Ko no Io > Kr nr Ir + Kt where no and nr are the number of turns on the operating and restraining coils respectively and Ko and Kr the design constants and Kt the spring control torque constant.
At the threshold of operation Kt = Ko no Iomin . The differential current schemes do not react to the peak currents caused by overloads or swings, also due to dissimilarity in CTs, inrush-magnetizing current in transformer protection.
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