Solar Can Outcompete Grid Power in Rural India With the Right Planning: Study

New Delhi, June 25, 2026—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, which shows that careful planning of local demand, storage, grid conditions, financing, and long-term operations can unlock these 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—shows that Village Energy Plans (VEPs)—grounded in system modelling and field research—are critical to translating DRE’s cost advantage into reliable, scalable deployment. Drawing on modelling and evidence from operational DRE projects, the study finds that aligning renewable investments with village-level demand, grid conditions, storage needs, and financing can significantly improve project viability, reduce costs, and enable scale.

“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,” says Ashwitha Tunga, policy analyst at IISD.

The modelling shows that cost advantages persist across diverse contexts but only when systems are tailored to local demand. In Maharashtra’s Hiware Bazar, solar power is estimated at around INR 3 per unit, against a state average purchase cost of nearly INR 6. In Assam’s Bamun Sualkuchi, solar delivers power at roughly INR 4 per unit compared to the average purchase cost of over INR 8.5. Both remain competitive even without subsidies.

"DRE can offer affordable and reliable electricity in rural India, often below state procurement costs across very different rural contexts. In most cases, it can remain competitive even without subsidies. But cost advantages alone are not enough. Systems must be planned around local demand, integrated with the grid, and planned for long-term operations. In that context, scaling DRE is not merely about installing more capacity; it is about building systems that work with local grids and deliver lasting value for both communities and utilities,” explains Sunil Mani, policy advisor at IISD.

One Village, One Plan

The study’s central recommendation is the adoption of VEPs for all DRE-targeted communities. A VEP brings local electricity demand patterns, seasonal variations, storage needs, grid conditions, financing arrangements, and long-term operation and maintenance considerations together into a single planning framework.

The analysis highlights that demand patterns are the most important factor shaping performance and costs. Daytime agricultural loads can be met with solar and minimal storage, while evening demand requires higher battery capacity or stronger grid integration, underscoring the need for tailored solutions 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 ecosystem 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,” says Rajiv Shukla, executive director, Idam Infrastructure Advisory Pvt. Ltd.

Media Contacts

Sunil Mani, policy advisor, IISD; [email protected] 
Madhulika Verma, senior communications officer, IISD; [email protected]