Government Support: The industry may not have the financial capacity to fund new technologies without the aid of government programs to provide incentives for investment.

Lack of policy and regulation: No defined standards and guidelines exist for the regulation of smart grid initiatives in India.

Speed of technology development: The solar cell, the basement fuel cell, and the chimney wind generator were predicted 50 years ago as an integral part of the home of the future. This modest historical progress will need to accelerate.

Compatible equipment: Some older equipment must be replaced as it cannot be compatible with smart grid technologies. This may present a problem for utilities and regulators since keeping equipment beyond its depreciated life minimizes the capital cost to consumers. The early retirement of equipment may become an issue.

Capacity to absorb advanced technology: Most DISCOMS have limited experience with even basic information and communications technology (ICT) and, as a result, they have weak internal skills to manage this critical component of smart grids.

Consumer education: If a company installs advanced metering and two-way communication along with time-of-use rates, the question is “Will customers use it?” If there aren’t enough customers who use the features, the benefits of a smart grid will not be achieved. Thus, for a smart grid implementation sufficient marketing analysis and product design to optimize the likelihood that customers will use the new technology, and an education, communication and public relations program aimed at creating an understanding of smart grids.

Strengthening the grid: ensuring that there is sufficient transmission capacity to interconnect energy resources, especially renewable resources.

Developing decentralized architectures: enabling smaller scale electricity supply systems to operate harmoniously with the total system.

Developing communications infrastructure: to allow potentially millions of parties to operate and trade in the single market.

Active demand side: enabling all consumers, with or without their own generation, to play an active role in the operation of the system.

Integrating intermittent generation: finding the best ways of integrating intermittent generation including residential micro-generation.

Enhanced intelligence: of generation, demand and most notably in the grid.

Capturing the benefits of DG and storage.

Preparing for electric vehicles: whereas Smart Grids must accommodate the needs of all consumers, electric vehicles are particularly emphasized due to their mobile and highly dispersed character and possible massive deployment in the next years, what would yield a major challenge for the future electricity networks.

Power theft: Power theft has been one of the major issues in India. A few ways to help prevent the power theft are the use of overhead lines that are insulated and the LT overhead wires used for distribution of power could be replaced with insulated cables in order to minimize the theft of energy through hooking. The conventional energy meters could be replaced with digital tamper proof meters and the use of prepaid card is yet another solution to eradicate theft of energy.

Inadequate Grid Infrastructure: For India to continue along its path of aggressive economic growth, it needs to build a modern, intelligent grid. It is only with a reliable, financially secure Smart Grid that India can provide a stable environment for investments in electric infrastructure - a prerequisite to fixing the fundamental problems with the grid.

Low metering efficiency: The commercial losses are mainly due to low metering efficiency, theft & pilferage. This may be eliminated by improving metering efficiency, proper energy accounting & auditing and improved billing & collection efficiency. Fixing of accountability of the personnel / feeder managers may help considerably in reduction of AT&C loss.

Lack of awareness: The understanding of consumers on how power is delivered to their homes is very minimal. Before implementing Smart Grid concepts, they should be educated about the Smart Grids, the benefits of Smart Grid and Smart Grid’s contribution to low carbon economy. Consumers should be made aware about their energy consumption pattern at home, office etc. Utilities need to focus on the overall capabilities of Smart Grids rather than mere implementation of smart meters. Policy makers and regulators must be very clear about the future prospects of Smart Grids.