23-05-2025
Digital energy grids: The UPI moment for electricity?
The recently released paper by International Energy Agency (IEA) and the Foundation for Interoperability in Digital Economy (FIDE) on a vision for a Unified Energy Infrastructure (UEI) has generated enormous interest and possibilities of UEI becoming the UPI moment unlocking millions of digitised energy transactions in the sector. However, before we try to answer the question, it will be useful to understand the basic tenets of UPI that led to its unprecedented success and to assess if a similar case exists for replication in the energy sector.
UPI was set up around three pillars; (a) Unique digital identity linked with Aadhar; (b) Seamless digital connectivity by smart phones; and (c) A fully functional marketplace with digital banking and payment gateways. The three combined gives UPI transparency, scale with more than 400m smart phone users with a free market without any restrictions for trade to reach the scale that it has. To my mind, all three need to be replicated in the energy sector in order to nudge it towards the UPI moment. This replication must also crowd in retail players (consumers, service providers) at scale, something that is currently missing in the energy sector.
There is a fair level of digitisation in the energy infrastructure; generation assets, ultra and high voltage transmission, including their operations and transaction settlements, are all digitised. However, at the retail end, the digital identity of grid assets is more or less absent. The retail consumers with their Aadhar linked smart phones are not linked to the grid assets that they are connected to and neither is the retail grid digitized. The ongoing smart meter programme with an objective to connect 300m consumers will help bridge the digital divide but will not create a fully digitised platform that was the case with UPI.
There is a growing class of assets that have unique digital identity and are now getting connected using the internet and, for a small subset of such assets, regulations have been eased to allow for the free market, EV charging being an example. An estimate indicates that there are a little over 25,000 EV chargers with a consumption of little less than 600m units, which in value terms is ₹400-500 crore, a small fraction of the total revenue of the generation sector (with estimated generation of 1,750 b units as per the ministry of power in 2022-23) is about ₹7 lakh crore. If one adds the transmission and distribution sector, the revenue will cross Rs. 10 lakh crore. The Distributed Energy Resources (DERs), like solar rooftops, decentralised ground mounted solar plants, EV chargers, Battery Energy Storage Systems (BESS) that are being added to the grid have unique digital identities. Their numbers are surging – the PM Surya Ghar Muft Bijli Yojana has added 1 m rooftops last year and is poised to reach 10m by March, 2027. Even if all these DERs are allowed to freely trade, the scale is still very small, nowhere close to what UPI has seen in the last few years.
In the case of UPI, the availability of free market at retail level was a key to its success. In the electricity sector, the opposite is the case with the sector and the participants being regulated. In the last FY, just under 7% of power was traded (121 b units) as most of it is tied to long term Power Purchase Agreements (PPAs). While there is a growing number of retail ownership of DERs like Roof Tops and electric vehicle (EV) charging; most governments have not issued policy guidelines for trade, except for net metering which allows for sale to the utility at a pre-determined cost. However, things like Peer to Peer (P2P) trading and Vehicle to Grid (V2G) are yet to be included in the policies.
For trading electricity, there is a need for getting a licence – therefore, even if a policy allows for such transactions, each and every retail DER owner will need to obtain a license in the current regulatory landscape. It may be worth noting that a similar situation was averted in 2018 for EV charging – ministry of power issued policy guidelines stating that charging of EVs is not sale-resale of power but is service. This has unlocked the market for EV charging as there is no requirement of any permission or license to set up. Similar policy and regulatory reforms are needed for solar roof tops, ground mounted decentralised, use of vehicle batteries to discharge when grid needs power, use of decentralised BESS and similar transactions.
While policies and regulations can usher in market, it is pertinent to point out that the rationale for these regulations is the technical carrying capacity of power sector assets, unlike in the case of the internet which is not constrained technically. The capacity of transformers, wires particularly at low voltage level that provide power to large consumers limits the addition of DERs and therefore the need for regulations. Needless to say, that while capacity augmentation could pave the way, a digitisation of the low voltage grid assets and visualisation of load flow could make an enormous difference. This would allow utilities to visualise and identify capacity constraints in real time, enable them to find windows in the time of day where the same assets can be used, given that electricity demand changes during the course of days and months. Such a digitised grid with integrated DERs could allow for many more transactions than what could be done just by the use of DERs without the digital backbone. Therefore, investments in digitisation of low voltage grid is the prerequisite for scaling up digital transactions. Use of Artificial Intelligence (AI) could significantly add to the optimal usage of the existing grid infrastructure.
Electricity grids, particularly at low voltage levels, need to be digitised in order to enable transactions at scale. In addition to the digital platform, policy and regulatory reforms that could aid transactions between retail consumers and service providers is also a necessary condition. The electricity sector with its projected growth and decentralisation could not only nudge a UPI like moment but would also give rise to millions of innovators who could add significant value to the grid in a sustainable manner.
This article is authored by Saurabh Kumar, vice president, India, Global Energy Alliance for People and Planet (GEAPP).
