By Rishika Ranga, Consultant, Energy Policy and Regulations Group, CSTEP
India’s electricity sector, characterised by centralised generation and long-term power purchase agreements (PPAs), is facing challenges due to the growing decentralised renewable energy (DRE) market. This growth, particularly driven by rooftop solar (which constitutes nearly 21 per cent of India’s 110.83 GW of installed solar capacity), calls for updated energy trading methods. Unlike centralised power, DRE often produces surplus power at the point of consumption, making it suitable for flexible, real-time and decentralised market mechanisms such as peer-to-peer (P2P) trading.
Simply put, P2P trading enables those with DRE systems (prosumers) to sell surplus power using blockchain platforms, allowing direct energy transactions through transparent, decentralised ledgers. For consumers, it is a way to procure green energy at competitive rates. P2P trading also supports active demand-side management through real-time data on usage and transactions, which can help reduce energy bills.
Recognising P2P’s potential to drive rooftop solar adoption, three Indian states – Karnataka, Uttar Pradesh and Delhi – have issued guidelines and regulations to support such trading. However, certain gaps in these regulations could limit their effectiveness and scalability.
Comparative overview of state regulations
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Regulatory gaps and the solutions
Eligibility criteria: Conditions for exclusion
Currently, Karnataka and Uttar Pradesh limit participation to rooftop solar consumers, excluding other emerging DRE sources, such as small wind turbines or biomass-based systems. Expanding eligibility would better align with broader clean energy goals.
While the primary objective of P2P trading is to encourage domestic prosumers to sell only their surplus energy, the current provisions of Karnataka and Uttar Pradesh leave room for prosumers to sell their entire generation capacity for profit. This risks turning P2P trading into a commercial activity rather than a mechanism to share excess power, potentially undermining its original intent. States can consider introducing parallel regulations for domestic and commercial P2P trading. While Karnataka and Uttar Pradesh regulations state that P2P trading licenses will be granted on a first-come, first-served basis, they do not define any limits, whether in terms of the number of participants, installed capacity or total capacity that can be injected into the transformer. Regulations should provide clear caps (similar to those in Delhi) to maintain grid stability.
Tariffs and charges: Are the incentives adequate?
While all current regulations allow buyers and sellers to fix prices mutually, this overlooks a key advantage of smart contract-based P2P trading, enabling dynamic pricing to balance supply and demand in real-time. Currently, only Karnataka explicitly recognises dynamic pricing to be set through the platform. Introducing a floor and maximum price could protect against excessive pricing and allow greater flexibility.
Further, service provider fees are pre-fixed by the commissions. Given that P2P trading is still in its early stages, fixing these charges prematurely could stifle innovation. Additionally, services may also vary. Platforms can provide value-added services such as real-time monitoring, forecasting, auto-matching of trades and demand response. It remains unclear how these differentiated services will be priced.
In Uttar Pradesh, open access and wheeling charges apply to P2P transactions at rates similar to those for large commercial and industrial consumers. While Delhi has waived these rates, they will only remain in effect until March 2026. Subsidising such charges could make participation viable for small residential prosumers. Finally, in all the models, the discom acts as the payment gateway between prosumers, consumers and service providers, introducing an additional layer of centralised control and undermining the decentralised intent of P2P markets.
Participant protection and aggregator role
Karnataka and Delhi regulations direct disputes between prosumers and consumers to the Consumer Grievance Redressal Forum, but offer no clarity on resolving disputes between participants and service providers. This is a critical gap, especially given the role of service providers in managing transactions and data. National data protection laws may apply, raising potential conflicts in jurisdiction between data protection authorities and electricity regulators. Aligning data privacy obligations under both electricity and data protection laws will help avoid such conflicts.
The regulations also require the prosumer/consumer to submit scheduling information in four to eight time blocks prior to the injection. Realistically, small-scale participants – the target participants of P2P trading – cannot be expected to submit injection information on an hourly basis. Service providers are the most suitable to provide the necessary scheduling information, and the regulations should be modified to recognise this.
Further, while the regulations focus on preventing disruptions to discom systems and any other negative impacts on the discoms, they should explicitly cover the other responsibilities of service providers, such as ensuring participant privacy and security, timely power delivery, payment collection and settlement and fair trade practices. Additional obligations, such as reporting compliance, trading data and performance metrics to regulators, could strengthen oversight and market integrity.
To sum up, P2P energy trading can democratise energy markets, increase consumer choice and accelerate the transition to DRE. However, to fully realise these benefits, India needs more adaptive and pilot-driven P2P regulations that ensure inclusivity and flexibility, while supporting the country’s clean energy goals.