Balancing Distribution: DSOs’ critical role in managing complex systems

As India moves towards its renewable energy targets and climate change mitigation goals, the complexity of its power systems is increasing. The emergence of behind-the-me­ter load (including solar rooftop and ba­ttery energy storage systems [BESSs]), is disrupting the traditional unidirectional power supply. As a result, bidirectional power flow is gaining prominence. This, along with increasing power demand and the intermittent nature of renewable energy generation, is creating the need to institutionalise new entities to balance the grid at the distribution level. In various liberalised electricity markets all over the world, distribution system operators (DSOs) have been managing the wire business, including connection/disconnection of distributed energy resources (DERs), network planning and maintenance.

To recall, various Indian power sector policies, reports and studies have em­pha­sised the need and relevance of DSOs for the power distribution segment. The draft National Electricity Policy, 2021 proposed the introduction of the DSO as an independent entity for performing real-time operation of the distribution system, while maintaining grid security, stability and reliability of supply. The Forum of Regulators (FoR) has, recognised the need for DSOs in the Indian power system and the need for capacity building for this purpose. The FoR’s report on Scheduling, Acco­u­n­ting, Mete­ring and Settlement of Tra­nsactions in Electricity highlights the difficulties likely to be faced by load despatch centres (SLDCs/ RLDCs/NLDC at the state, regional and national levels res­pe­c­­tively) in operations and financial settlements with the increasing number of short-term open access consumers, electric vehicles (EVs) and DERs (especially rooftop solar). It highlights the need to create a robust array of DSOs (which should be neutral, independent, transparent, non-discriminatory and equipped with a skilled workforce) on the bylines of the SLDC. These DSOs would report to the SLDC and the state regulator. Similarly, the FoR’s report on Capacity Buil­ding of In­dian Load Despatch Centres proposes es­tablishing DSOs in each state, which will undertake the functions of operating the distribution grid, managing DERs, coordinating operations between distribution and transmission grids, managing bidirectional power flow, and undertaking DSO-transmission system operator (TSO) and DSO-ISO (independent system operator) interactions.

Need and role of a DSO

DERs offer reliable and affordable power at minimum network losses and have a significant role to play in India’s net zero journey and in enhancing local sustainability. DERs, including solar roof­top and BESSs, demand response and plug-in EVs are gaining rapid traction in the Indian power sector. Solar rooftop ca­pa­city is growing at a faster pace, more so in recent months, led by increased awa­re­ness of its benefits and conducive po­licies. Grid-scale BESSs are emerging as effective solutions for providing grid services such as voltage and frequency regulation, and black start. Moreover, there is a rapid uptake of EVs backed by the go­vernment’s Faster Adoption and Manu­facturing of (Hybrid &) Electric Ve­hi­cles scheme. With the proliferation of DERs and EVs and the emergence of new market players such as prosumers, ag­g­regators and active consumers, the distribution network will transform fr­om a traditional passive network (which receives bulk power via transmission net­works from large centralised distribution units) to an active network characterised by bidirectional power flow.

A DSO will play the role of managing DERs on a real-time basis while maintaining grid security, reliability and efficiency. The role of a DSO in despatching power from DERs will be similar to that of SLDCs. It will facilitate many functions such as ensuring non-discriminatory open access, managing bidirectional power flow, local congestion management, utilisation of demand-side flexibility, network reinforcement, granular data collection and analysis, and other operational/planning decisions. A DSO will ensure integrated network planning by arriving at the optimal sizing and placement of DERs and thus encourage optimal network investment decisions. The flexibility offered by DERs is a promising tool for maintaining a secure and reliable grid. Moreover, DSOs will be instrumental in efficiently utilising the flexibility embedded in the electricity distribution network and operationalise ancillary services, flexibility services and the retail market for capacity. Further, synergistic TSO-DSOs interaction will provide active-reactive power support to TSOs and facilitate the participation of DERs in dedicated markets.

Currently, discoms perform the load fo­re­casting exercise for aggregate net consumption. However, with access to granular be­hi­nd-the-meter forecasts and segregation of load demand, DSOs can obtain better forecasts, resulting in enhanced system operation and efficient planning.

Technical, institutional and regulatory requirements

Operationalising DSOs requires amendments to the existing institutional and re­gulatory framework. The role and res­pon­sibilities of DSOs as well as a comprehensive coordination mechanism with stakeholders such as state and central regulators (SERCs and CERC), state transmission utilities, the central transmission utility, discoms, NLDC/RLDCs­/SLDCs, ag­gregators, customers, etc., need to be spelled out. A recent report,  “Trans­for­ming the India Power Sector Distribution System Operators: Needs, Frameworks and Regulatory Considera­tion” presents four models/alternatives for an institutional framework for DSOs in the country. These are: separate non-profit entity; sub-state load despatch centre/area load despatch centre to DSO transition; discom to DSO transition; and repackaging of existing and new entities. The report notes that due to the diversity in generation and load patterns, ownership and operation models of discoms, consumer mix and state-specific regulations, different states will have different considerations for adopting any of the four suggested alternatives.

On the institutional front, a DSO should be an independent and neutral entity, so as to function effectively in discharging its responsibilities without the influence of any other power sector organisation. Existing codes/regulations will need modifications to incorporate the role and functions of a DSO.

On the technology front, upgradation of power systems and processes is necessary to facilitate the functioning of a DSO. For real-time visualisation, monitoring and control of the power system, the deployment of smart grid infrastructure and digital solutions needs to be enhanced. A state-of-the-art supervisory control and data acquisition (SCADA) system; software for data acquisition, monitoring, supervision, and control; and enhanced use of information and co­mmunications technology and ad­va­n­­ced metering infrastructure are needed. A two-way, strong and redundant co­mmunication network between the SCADA system and smart technology such as intelligent electronic devices, pha­sor measurement units and internet of things devices are a must for a DSO to perform. The deployment of smart grid te­chnologies can enable enhanced in­ter­action between DSOs and consumers or DERs, which is key for a system operator. Over and above the entire DSO architecture, incorporating a multi-layered cybersecurity framework is essential for system security.


In view of the power sector’s progress in recent times, especially the growing proliferation of solar rooftop and EVs, the adoption of a DSOs (or such an institution) is needed sooner than later. Besides, with the segregation of carriage and content (as proposed under the amendment to the Electricity Act, 2003) and the emergence of retail electricity suppliers, a DSO will have a greater role to play with regard to providing network access and grid services. Going forward, backed by a conducive institutional, regulatory and technical framework, DSOs will not only im­prove network management and load forecasting but also facilitate an ancillary and flexibility services markets.

Priyanka Kwatra


Experts speak

Is there a need for a distribution system operator in India’s power sector? What should be its key role and responsibilities? How will it benefit the sector and what will be the key challenges in its implementation?

Dr Somit Dasgupta, Senior Visiting Fellow, ICRIER; and Former Member (Economic and Commercial), Central Electricity Authority (CEA)

In the traditional system, power reached the ultimate consumer in a unidirectional flow. Today, the scenario has changed. We have distributed generators that are feeding into the grid; we have solar rooftop owners, some of whom are feeding the grid; and we also have people with battery storage who have the capacity to supply power to the grid. In addition, we will have to deal with demand response when it becomes a reality in the country and we, in any case, are having to deal with EVs, which are going to multiply in numbers very soon. To maintain such a complex system in harmony, one requires the use of granular data, which only a DSO can provide. India, therefore, certainly needs a DSO, although unfortunately, we have not really progressed in this area. We are still at a discussion stage and what we really need is a big policy announcement for DSOs, which needs to be backed by an authentic document. Perhaps, the FoR is an appropriate institution to initiate this process. Forget about DSOs, in quite a few of our states, SLDCs are poorly eq­ui­pped to handle their mandate and are lacking in infrastructure, ca­pa­city, financial resources, etc. The system of DSOs can only work when we have top-of-the line SLDCs. DSOs, in fact, are in a way sub-SLDCs.

There are several roles that a DSO needs to undertake. It has to do peak load management, ensure that there is no network congestion, procure voltage support, provide flexibility support to transmission operators, etc. DSOs can also operate as neutral market facilitators and provide high resolution price signals to market players that own flexibility assets. DSOs could also provide reactive power support to transmission service operators. DSOs can help meet peak load through locally stored or generated energy, instead of seeking generation from distant sources, thus decreasing grid congestion and deferring further network investments. DSOs can also manage consumer data related to electricity consumption, production and billing.

The first and foremost requirement is that DSOs have to be regulated entities, which need to operate as “not for profit” organisations. DSOs need a full gamut of regulations so that they can effectively deal with owners of distributed generation, rooftop owners supplying to the grid, etc. For example, one needs bilateral flexibility contracts between DSOs and DER owners to provide local system services, such as voltage control, peak shaving and congestion management. Second, DSOs need top-of-the-line hardware including information and communications infrastructure. Unless DSOs can communicate with behind-the-meter devices at consumer premises, they cannot be effective. Also, the presence of smart meters is a prerequisite without which a DSO will not be able to function. Provision of hardware, communication infrastructure, smart meters, etc., are all tasks that are capital intensive in nature and will increase the cost of supply. The benefits can, of course, outweigh costs, provided DSOs can function to their full potential.

Pankaj Batra, Senior Adviser, IRADe, and Ex-Chair­person and Member (Planning), CEA

With the increase in distributed generation such as rooftop solar PV, the distribution sector is set to become another centre of action in the future for grid management. While the government set a target of 40 GW of rooftop solar PV by 2022, it did not take off as anticipated. However, it has been growing in India at a rapid pace in recent times. Rooftop solar PV exceeded 10 GW in June 2022, recording a jump of 44 per cent in the previous 12 months, with the addition of 2.5 GW. Decentralised grid management is required for the information to come to the round-the-clock control room at the distribution level, that is, the DSO, instead of this going straight to the TSO. The DSO has to ensure balance of demand and supply in its area at each point of time. The CEA Technical Standards for Connectivity of the Distributed Generation Resources already mandates facilities for communication and storage of data for distributed generation, as mandated by the licensee. This data from the rooftop solar PV would help DSOs in planning and sc­heduling generation from other sources, balancing of load and generation in their area at each point of time. The revised Tariff Policy of 2016 also mentions distribution SCADA, with distribution management system and energy audit functions, being implemented along with smart meters to reduce power theft.

Another advantage of having a DSO is helping it plan for efficient power procurement. With the installation of smart meters being a massive ongoing exercise across many states, this will present volumes of data, which, if analysed well, will give an indication of periods during the day and during seasons when power needs to be procured, rather than procuring generation for the entire day or the entire year. There is a huge opportunity to save a huge amount of money for the distribution company after the data is analysed by the DSO. Most private distribution companies such as Tata Power Delhi Distribution Company and Reliance BSES Distribution companies in Delhi already have a DSO, where they are already doing this and saving money.

Therefore, in today’s world there is a critical need for a DSO. At present, each substation is dealing with issues of breakdown of the distribution system in their own area and resorting to corrective measures. But there is no single round-the-clock point of information for the entire distribution system in the area of the distribution licensee that is responsible for monitoring and control of the entire system. This will be further necessitated with the proliferation of distributed generation resources and demand response for the distribution system of the distribution licensee as a whole. There will not be any challenges in implementing the DSO. All it will require is a set-up within the distribution licensee, the cost of which would be paid many times over, given the benefits of saving through rational electricity procurement. This will, in addition, provide intangible benefits for customer relationship management.