New Delhi: The Central Electricity Regulatory Commission (CERC) has floated a proposal suggesting the Buyout Price as an alternate mechanism for fulfilling the Renewable Consumption Obligation (RCO). Issued on Wednesday, the proposal follows the Ministry of Power’s notification dated September 27, which mandates a minimum share of renewable energy consumption by designated consumers such as electricity distribution licensees, open access users, and captive power producers.
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Under the new framework, designated consumers can meet their RCO obligations through three means: consumption of renewable electricity either directly or via energy storage systems, purchase or generation of Renewable Energy Certificates (RECs), or, as a last resort, through payment of a buyout price determined by the Commission. The funds collected through this buyout mechanism will be credited to the Central Energy Conservation Fund, with 75 percent of the proceeds transferred to State Energy Conservation Funds. The amounts will be used to expand renewable and energy storage capacities, supporting India’s clean energy transition goals.
CERC stated that while the first two options — direct consumption and REC purchase — are the preferred compliance methods as they directly contribute to renewable capacity growth, the buyout price serves as a fallback mechanism for consumers unable to meet their obligations through these routes. Given India’s current renewable capacity and rate of annual addition, the regulator expects the buyout option to be required for at least the next two years.
The "Buyout Price" refers to a financial payment option available to designated electricity consumers who are required by the RCO to consume a certain share of renewable energy. If these consumers are unable to fulfill their RCO by directly consuming renewable power or by purchasing RECs, they can instead pay the buyout price as an alternate method to comply with their renewable energy obligations.
The proposed buyout price has been designed to reflect both the cost of electricity and its associated green attributes. CERC has calculated a weighted average REC price for FY 2024–25 at Rs 232.84 per MWh, based on transactions through power exchanges and trading licensees. To encourage preference for renewable consumption and REC trading, the commission proposes fixing the buyout price at a 5 percent premium over the REC price, setting it at Rs 245 per MWh for FY 2024–25. This mechanism ensures that the buyout option remains less attractive than the direct use or purchase of renewables and RECs.
Looking ahead, CERC plans to update the buyout price each financial year up to FY 2029–30, pegging it at 105 percent of the previous year’s weighted average REC price. The National Load Despatch Centre (NLDC) will publish these average prices annually by April 30, enabling transparent and predictable compliance costs for designated consumers.
The commission emphasised that the buyout framework aligns with India’s broader goal of establishing 500 GW of non-fossil fuel capacity by 2030. It aims to create a flexible but accountable pathway for industries and distributors to remain compliant, even in times of constrained renewable supply, while channeling funds back into green capacity development.
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CERC has invited stakeholder comments and suggestions on the proposal by November 21, 2025. Feedback can be sent to the Secretary, Central Electricity Regulatory Commission, at secy@cercind.gov.in or advisor-re@cercind.gov.in. The Commission will issue a final order after reviewing all submissions. Once implemented, the regulation is expected to strengthen demand-side support for renewable energy investment and promote greater accountability in India’s energy transition.
