Relays, which depend on excess of current for their operation, are less sensitive because they cannot make correct distinction between load conditions and minor fault conditions.
In order to overcome this difficulty differential relays are used.
Differential relay is one that operates when the phasor difference of two or more similar
electrical quantities exceed a predetermined value. Thus a current differential relay is one that compares the current entering a section of the system with current leaving the section.
Under normal operating conditions, the two currents are equal but as soon as fault occurs, this condition no longer applies. The difference between the incoming and outgoing currents is arranged to flow through relay operating coil. If this difference is equal to or grater than the pick up value the relay will operate and open the circuit breaker and isolate the faulty section.
Any type of relay when connected in a particular way can be made to operate as a differential relay. It is not the relay construction but the way in which relay is connected in a circuit makes it a differential relay.
There are two fundamental systems of differential or balanced protection:
(i) Current balance protection
(ii) Voltage balance protection