Rising peak electricity demand is increasing system costs despite rapid renewable expansion
Demand flexibility and demand response can reduce procurement costs and improve grid reliability
Smart meters, regulatory reform and national coordination are crucial to scale implementation
Maharashtra’s DFPO model signals a shift towards structured peak demand management
India’s energy landscape is undergoing rapid transformation. While the country is witnessing increasing penetration of renewable energy (RE), it simultaneously faces the challenge of fast-growing peak electricity demand. Meeting this rising demand while ensuring uninterrupted power supply and grid reliability requires significant investment and results in a higher marginal cost of power.
To manage this demand effectively and cost-efficiently, Demand Flexibility (DF) and Demand Response (DR) programmes are critical. These initiatives can enhance grid reliability, reduce reliance on expensive peak power, and optimise procurement costs so that reliable electricity reaches consumers at a reasonable price. The ongoing nationwide roll-out of smart meters is further enabling DF/DR programmes by providing granular consumption data and facilitating two-way communication across consumer categories.
India’s efforts to modernise its power sector, investments in grid decarbonisation, and a robust regulatory environment have laid the foundation for strategically addressing rising electricity needs. Moreover, a decade of experience in utility-led demand-side management (DSM) has created a strong baseline for DF/DR programmes to accelerate RE integration. However, DF readiness varies across states, with a few frontrunners demonstrating stronger policy, regulatory and technical preparedness.
A few progressive electricity distribution companies (discoms) have piloted DR programmes, particularly in the residential cooling segment. However, the voluntary nature of these programmes limits their effectiveness in power procurement planning, as discoms cannot reliably forecast or quantify available flexible demand during peak periods. To unlock demand flexibility, it is imperative to overcome inertia in implementing mandatory, state-wide Time-of-Day (ToD) tariffs across all consumer categories.
Regulators must mandate clear targets to guide discoms in overcoming existing impediments and systematically identifying and leveraging flexible demand. This would allow utilities to reduce costs associated with peak power procurement while enabling higher renewable energy penetration.
Maharashtra’s MERC (Demand Flexibility and Demand Side Management – Implementation Framework, Cost-Effectiveness Assessment, and Evaluation, Measurement and Verification) Regulations 2024 are among the first demand flexibility regulations in the country. The framework introduces a Demand Flexibility Portfolio Obligation (DFPO), requiring distribution licensees to shift a specified percentage of peak demand to non-peak hours. It also explicitly emphasises robust load research and consumer segmentation to design appropriate programmes. The regulations lay down requirements for cost-effectiveness assessment, measurement and verification, thereby creating a comprehensive structure for integrating demand-side flexibility into resource adequacy planning.
Assam and Karnataka have also released their respective draft AERC (Demand Response) Regulations 2024 and Draft KERC [Framework for Demand Flexibility (DF) / Demand Side Management (DSM)] Regulations 2025.
Tata Power Mumbai, in collaboration with the Municipal Corporation of Greater Mumbai (MCGM) and Sustainable Energy for All, piloted a demand flexibility programme to shift water pumping operations to off-peak hours. The initiative leveraged solar hours and ToD tariffs to reduce electricity costs. The February 2024 pilot at Bhandup shifted 345 kilowatts daily over three hours, saving 23,000 units of electricity and identifying a flexibility opportunity of 50 megawatts per month across 50 pumping stations.
Tata Power Mumbai also introduced automated DR for residential consumers during 2023-2024 to manage peak loads. In 2025, it moved to an aggregator-based demand flexibility programme for large HT commercial, industrial and public service consumers, signalling a shift towards portfolio-based, market-ready flexibility resources.
BSES Yamuna Power Limited in Delhi launched an automated DR programme in 2020 targeting residential and commercial consumers for peak-demand reduction. Tata Power Delhi Distribution Ltd implemented a programme between 2022 and 2025 combining automated and behavioural DR, supported by smart metering across residential, commercial and industrial segments.
While state-level initiatives are valuable, a coordinated national framework could significantly accelerate progress (see Table 1: National DF programme components). Such a framework would standardise operational procedures, establish unified regulatory principles, and enable aggregators to operate across state boundaries — creating economies of scale for technologies and service providers.
A comprehensive national programme should include multiple components. Technology market transformation, through programmes similar to FAME or PM Surya Ghar, could create demand and reduce costs for demand flexibility technologies. Integrating demand flexibility into building codes would mandate energy monitoring and control infrastructure in new construction, preparing future building stock for flexible load management.
Regulatory frameworks should incorporate demand flexibility into DSM regulations across all states, setting portfolio targets that incentivise utilities to access demand-side resources. A national assessment framework using smart meter and renewable energy data could identify optimal demand modulation periods, pricing signals and cost–benefit relationships.
Clear standard operating procedures are essential. Protocols covering flexibility estimation, consumer enrolment, service delivery and operational changes would streamline implementation for consumers and aggregators alike. Establishing open communication standards such as OpenADR for control, data exchange and measurement and verification would ensure reliability, transparency and readiness for automated demand response at scale.
Successfully scaling demand flexibility in India requires coordinated action across multiple dimensions.
Integration of smart metering for DF/DR programmes: Deployment of smart meters at the consumer level is crucial. Smart meters capable of recording energy consumption at 15-minute intervals enable time-slot-wise accounting and form the foundation of measurement and verification for DF/DR programmes. The data can also support data-driven load research to understand consumer demand patterns and flexibility opportunities.
Robust regulatory frameworks: Maharashtra has led by amending its DSM regulations to introduce flexibility objectives and notifying new regulations to its discoms in 2024. Clear, enforceable regulations backed by law are essential to define stakeholder roles, establish measurement and verification protocols, and ensure fair compensation to encourage participation and sustained engagement.
Policy support: Smart meters, smart grids and storage solutions such as BESS and PSP are already prioritised under existing policies. Leveraging these is essential. Policies promoting adoption of DF/DR-ready appliances and encouraging more technology providers to participate will further strengthen the ecosystem.
Widening DR programmes: Prioritising large commercial and industrial consumers can yield immediate gains. Dynamic pricing mechanisms such as ToD tariffs require robust real-time metering and signalling infrastructure. A smart grid will enable identification and control of essential and non-essential loads, allowing dynamic management of electricity demand in response to frequency fluctuations, load imbalances or renewable variability.
Stakeholder engagement: Successful DF/DR programmes depend on strong collaboration among discoms, consumers, aggregators and technology providers. Building consumer trust, ensuring ease of participation and delivering clear economic benefits are critical. Incentives play a key role in engaging and retaining consumers.
Market design and institutional mechanisms: Instruments such as the Demand Flexibility Portfolio Obligation (DFPO), introduced under Maharashtra’s DF/DSM regulations, provide a structured model for flexible demand planning. A national framework can guide discoms in setting peak demand reduction targets, defining response event frequencies and establishing participation benchmarks.
Lessons from global markets: Experience from international markets shows that DF and DR programmes can significantly reduce costs and improve grid resilience. India can adopt a phased, localised approach to replicate these successes. Identifying large energy consumers with viable flexibility opportunities should be prioritised. Aggregators, who have been central to the success of DF/DR programmes globally, can similarly drive large-scale adoption in India by integrating technology and engaging consumers.
Mahesh Patnkar is founder and managing director, MP Ensystems; Yashraj Gore is programme manager, power utilities and renewables, MP Ensystems; Shubham Bhamare is programme assistant, power utilities, MP Ensystems and Kaustubh Arekar, manager, power utilities, MP Ensystems.
Views expressed are the authors’ own and don’t necessarily reflect those of Down To Earth