Recognizing the potential of renewable energy to reduce greenhouse gas emissions and support rural electrification, India has set an ambitious target for increasing renewable energy capacity by 2022, particularly rooftop photovoltaic solar. However, affordably transitioning to clean energy is a daunting task for India’s distribution companies, or discoms, which are already reeling under heavy financial stress.

The cleanest and possibly the cheapest sources of power available in India and the world are uncertain and variable in their availability. Harnessing them fully will require flexible resources that can follow the variable output of renewables. To facilitate an affordable transition, policymakers and discoms can pursue twin objectives: enabling demand flexibility and offering fair compensation for services from distributed energy resources such as rooftop solar, to bring out its value to consumers.

This paper proposes four pathways for achieving these two objectives:

  • Targeted programs, such as community solar and energy efficiency.
  • Tariff design for both consumption and distributed generation.
  • Alternate market structures.
  • Peer-to-peer trading through the use of distributed ledger technology and the Internet of Things.

The authors examine various options in each of these four areas. Their initial analyses show that these four pathways can each promote one or both objectives. Different options, however, may serve the needs of certain locations and consumers better than others. Further study at more granular levels will be critical for identifying the most effective solutions.