CERC Proposes INR 245/MWh Buyout Price for Renewable Consumption Obligation Compliance

The Central Electricity Regulatory Commission (CERC) has issued a suo motu proposal to determine the Buyout Price as an alternate compliance mechanism for meeting the Renewable Consumption Obligation (RCO). This proposal follows a recent notification issued by the Ministry of Power (MoP) on 27 September 2025, which outlined the minimum share of renewable energy that electricity distribution licensees, open access consumers, and captive users must consume.

The Ministry’s notification offers three routes for designated consumers to fulfil their RCO, direct consumption of renewable electricity (either directly or via energy storage systems), purchase or self-generation of Renewable Energy Certificates (RECs), and payment of a buyout price specified by CERC. The buyout mechanism serves as a fallback compliance option when renewable electricity or RECs are not available. Funds collected through this mechanism will be deposited in the Central Energy Conservation Fund, with 75 percent of the proceeds transferred to respective State Energy Conservation Funds to promote renewable energy development and storage capacity creation.

In its proposal, CERC emphasised that the first two options viz. direct renewable energy use and REC purchases, should remain the primary means of compliance, as they directly encourage investment in renewable capacity. The buyout price, therefore, is meant to serve as a last resort for designated consumers who are unable to meet their RCO through other means. Given the country’s current renewable energy capacity and the pace of annual additions, the Commission anticipates that some consumers may need to rely on the buyout option in the next two financial years.

To ensure fairness and maintain the incentive to invest in renewable energy, the Commission has proposed linking the buyout price to the market value of RECs. It reasoned that while the REC price captures the value of the 'green attribute,' the buyout price should be slightly higher to discourage over-reliance on this option. Based on transaction data from FY 2024–25, CERC noted that RECs traded at a weighted average price of INR 232.84/MWh, with transactions on power exchanges averaging INR 225.36/MWh and those through trading licensees averaging INR 291.32/MWh. Accordingly, the Commission has proposed setting the buyout price at INR 245/MWh, representing a 5 percent premium over the average REC price for FY 2024–25.

For subsequent years up to FY 2029–30, the buyout price will continue to be pegged at 105 percent of the weighted average REC price of the preceding financial year. The National Load Despatch Centre (NLDC) will publish these prices annually by 30 April.

CERC has invited comments, suggestions, and objections from stakeholders on the proposal by 21 November 2025. Following stakeholder consultations, CERC will issue a final order determining the buyout price framework for RCO compliance.