India has an ambitious goal to achieve 500GW of non-fossil capacity by 2030. The renewable consumption obligation (RCO) is central to its success. RCOs require electricity distribution companies, open-access consumers and captive users to source fixed shares of their total electricity from renewable energy. This creates assured demand for green power and directs private investment into clean energy.
Utkarsh Mishra
Senior Associate
Sarthak Advocates & Solicitors
The four RCO categories, wind, hydro, distributed renewable energy and other renewable energy, form the annual total renewable energy requirement. Introduced under the Energy Conservation Act 2001, the RCO now creates a unified national system. Although renewable targets for 2024-30 remain largely unchanged from 2023, the September 2025 amendment from the Ministry of Power, in consultation with the Bureau of Energy Efficiency (BEE), is clearer and more practical.
The 2025 notification introduces substantive updates. The assumed generation from distributed systems is revised from 3.5 to 4kWh per kW each day, reflecting improved performance of rooftop solar and small renewables. Other renewable energy now includes the co-firing of biomass pellets and charcoal derived from municipal solid waste, aligning with India’s goal of a circular economy. A major reform allows wind, hydro and other renewable energy components to be fully fungible. Surpluses in one can offset shortfalls in another. Although distributed renewable energy remains non-fungible for deficits, its surplus may cover other categories.
Nuclear power is excluded from RCO calculations but the ambit for open-access and captive users has widened, allowing them to meet their obligations from any renewable source. Electricity generated and self-consumed from waste-heat recovery or by-product energy using fossil fuels is excluded, as is half the output from fossil-fuel cogeneration and aluminium smelting. The amendment does allow group-level aggregation, enabling companies under common control or registered co-operatives to meet the RCO on a consolidated basis.
Saksham Gulati
Associate
Sarthak Advocates & Solicitors
Reporting is streamlined with designated consumers required to submit certified energy accounts by 31 July each year, or 31 October 2025 for 2024-25. These have to be followed by compliance reports after addressing shortfalls by 31 December, or 31 March 2026 for 2024-25. The notification provides compliance monitoring formats and the BEE will soon issue detailed procedural guidelines, ensuring uniform monitoring through state load dispatch centres for distribution licensees and accredited energy auditors for others.
A major change lies in how entities may fulfil their RCOs. The 2025 framework recognises three compliance routes. One is by the direct consumption of renewable electricity, either self-generated or procured through an energy-storage system, the first formal inclusion of storage under RCOs. Another is by purchasing or self-generating renewable energy certificates (REC) under Central Electricity Regulatory Commission (CERC) regulations, including those obtained through virtual power purchase agreements. Finally, entities otherwise unable to meet targets may pay a buy out price determined by the CERC.
This buy out option introduces a structured monetary mechanism that still supports the renewable-energy ecosystem. In a draft proposal, the CERC suggests a buy-out price of INR245 (USD2.78) per MWh in 2024-25 and 105% of the weighted-average REC price thereafter. The rate reflects the value of the green attribute plus a modest premium, encouraging firms to use direct procurement or REC purchases rather than payment. Payments will be credited to the Central Energy Conservation Fund, with 75% transferred to the State Energy Conservation Funds to finance renewable and storage projects. Although the CERC proposal is still open for stakeholder comments, linking the buy out to market REC prices is a transparent and rational foundation for this new compliance route.
The revised RCO framework is a stronger and more coherent foundation for clean energy transition. With greater fungibility and a transparent buy-out mechanism, it balances flexibility with accountability. The policy better reflects market realities while still aiming for the 2030 targets. When the BEE issues detailed guidelines, the RCO 2025 will become a practical driver of measurable progress in India’s renewable ecosystem.
Utkarsh Mishra is a senior associate and Saksham Gulati is an associate at Sarthak Advocates & Solicitors
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