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Peer-to-peer (P2P) electricity trading is emerging as an important tool to increase the adoption and diffusion of renewable energy use. In this case, electricity is traded on an online platform between local community-based or individual power producers (referred to as “prosumers”) and consumers of electricity. Consumers and prosumers manage the price and volume risk themselves. State Electricity Regulatory Commissions (SERCs) of states such as New Delhi, Uttar Pradesh and Karnataka have issued regulations and guidelines to govern and promote such trading. However, there are regulatory and operational impediments to widespread adoption of P2P electricity trading.

The Electricity Act, 2003 (act), does not recognise the sale and purchase of electricity between consumers. Any entity seeking to distribute or trade electricity must obtain a licence from the relevant SERC. Therefore, the regulations issued by various SERCs permitting P2P electricity trading within their states have a questionable statutory basis. To effectively promote this market, the central government should, as an immediate step, use its rule-making powers to delicense P2P trading, followed by an amendment to the act.

The dispute resolution mechanism applicable to disputes between prosumers and consumers in the case of P2P trading is unclear. Since the disputes will be among private entities, SERCs will not have jurisdiction over such disputes. Consequently, the guidelines for P2P trading in Uttar Pradesh provide that any dispute between P2P participants will be dealt with by the Consumer Grievance Redressal Forum. While consumer forums could be an avenue for dispute resolution for P2P trading disputes, capacity building among adjudicators at consumer forums to deal with such disputes becomes important given the complexity of electricity sector disputes.

Another impediment to faster adoption of P2P trading is the applicability of open access charges on P2P consumers on the power they consume, as determined by the relevant SERC. P2P trading regulations of the Karnataka Electricity Regulatory Commission require P2P consumers to pay green energy open access charges, except where prosumers and consumers are connected to the same distribution transformer or substation. P2P consumers must also pay transaction charges, again as determined by the relevant SERC, to service providers of the trading platforms. However, the P2P trading guidelines of the Delhi Electricity Regulatory Commission exempt P2P consumers from paying open access charges until 31 March 2027. Regulators should consider whether such small-scale transactions should be treated at par with power procurement by large scale commercial and industrial consumers, to whom open access charges apply and whether such charges are likely to make P2P sourced electricity uncompetitive compared with power purchased from the local distribution licensee.

In addition to the open access charges and transaction charges, P2P participants must also bear the cost of procuring and installing smart meters, which are mandated by state regulations. Although these devices are essential for recording energy sold and consumed to allow accurate billing, they are expensive. States should consider who should bear the upfront cost of smart meters to enable their adoption even by lower income households and individuals. Service providers, which seek to gain through large volumes of P2P transactions on their platforms, could consider fully or partly financing the cost of the smart meters for P2P participants in the early years and the state could consider offering concessional loans towards this.

P2P electricity trading presents an interesting opportunity to promote the consumption of locally produced renewable energy while also improving energy access to underserved communities. Decentralisation is a key pillar of energy transition and an effective tool to reduce grid congestion by localising demand and supply.

P2P electricity trading, already successfully deployed in countries such as the Netherlands and the UK, can play a role in accelerating 含羞草社区 ambitious 2070 net-zero target. Legislative support and incentives for faster adoption will help establish P2P electricity trading as an important part of 含羞草社区 electricity sector.

Megha Kaladharan is a partner and Afra Ansari is an associate at Trilegal.