Solar-based distributed renewable energy (DRE) systems can generate electricity in rural India at a lower cost than conventional grid supply, according to a new study. The report says careful planning around local demand, storage, grid conditions, financing, and long-term operations is needed to realize those savings.
A joint report by the International Institute for Sustainable Development (IISD) and Idam Infrastructure Advisory Pvt. Ltd., “Scaling Rural Distributed Renewable Energy in India: A Framework for Planning and Implementation,” says Village Energy Plans (VEPs), based on system modelling and field research, are essential for translating DRE’s cost advantage into reliable, scalable deployment. Drawing on modelling and evidence from operating DRE projects, the report finds that aligning renewable energy investments with village-level demand, grid conditions, storage requirements, and financing can improve project viability, reduce costs, and support wider deployment.
“To scale rural DRE, India must move from isolated projects to system-level planning, starting with VEPs that reflect local demand, integrating DRE with distribution companies, and planning early for storage and surplus power management. Without this, cost advantages will not translate into reliable, scalable deployment,” said Ashwitha Tunga, policy analyst at IISD.
The modelling shows DRE retains a cost advantage across different settings when systems are designed around local demand. In Maharashtra’s Hiware Bazar, the report estimates the levelized cost of solar electricity at about INR 3 ($0.032)/kWh, compared with the state’s average power procurement cost of nearly INR 6/kWh. In Assam’s Bamun Sualkuchi, solar generation is estimated at about INR 4/kWh, compared with an average procurement cost of more than INR 8.5/kWh. According to the report, both projects remain cost-competitive without subsidies.
“DRE can provide affordable and reliable electricity in rural India, often below state power procurement costs across diverse rural contexts. In most cases, it can remain competitive even without subsidies. But lower costs alone are not enough. Systems must be designed around local demand, integrated with the grid, and planned for long-term operation. Scaling DRE is not simply about adding capacity; it is about building systems that work with local grids and deliver long-term value for communities and utilities,” said Sunil Mani, policy advisor at IISD.
The report recommends adopting Village Energy Plans for all communities targeted for DRE deployment. A VEP combines local electricity demand, seasonal load variations, storage requirements, grid conditions, financing arrangements, and long-term operation and maintenance into a single planning framework.
The analysis identifies demand patterns as the main factor influencing system performance and cost. Daytime agricultural loads can be served largely with solar generation and limited battery storage, while evening demand requires greater storage capacity or stronger grid integration. The findings underscore the need for site-specific planning rather than standardized deployment models.
“If India wants DRE to contribute meaningfully to its clean energy and net-zero ambitions, it must move beyond uniform deployment and adopt village-level energy planning. Success will depend not only on understanding local demand and system requirements but also on creating a supportive regulatory framework that enables seamless grid integration, consumer aggregation, virtual net metering, efficient management of surplus power, and stronger utility participation. Only then can DRE evolve from a collection of projects into a scalable and sustainable rural energy solution,” said Rajiv Shukla, executive director at Idam Infrastructure Advisory Pvt. Ltd.
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