Ministry Of Power Introduces Renewable Consumption Obligation To Boost Green Energy Use

The Central Government, in consultation with the Bureau of Energy Efficiency, has introduced a new notification setting minimum renewable energy consumption standards for designated power users across the country. This updated framework replaces a previous notification issued in 2023 and aims to boost the use of green energy among electricity consumers. Known as the Renewable Consumption Obligation (RCO), the new rule requires designated consumers, including electricity distribution licensees, open access consumers, and captive users, to ensure that a specified portion of their total electricity consumption comes from renewable sources. For open access consumers and captive users, this obligation applies specifically to electricity sourced from providers other than their regular distribution licensee.

The RCO establishes yearly targets from 2024-2025 to 2029-2030, reflecting a gradual increase in renewable energy consumption. In the first year, 2024-2025, the total obligation is set at 29.91% of overall electricity consumption. This includes 0.67% from wind energy, 0.38% from hydro energy, 1.50% from distributed renewable energy (DRE), and 27.36% from other renewable energy sources. By 2029-2030, the total RCO is expected to rise to 43.33%, showing a clear trajectory for higher renewable adoption.

The notification specifies how each component of the obligation can be met. Energy from new wind and hydro projects commissioned after March 31, 2024, will count toward the respective obligations. Hydro obligations can also be fulfilled by supplying free power to the state or distribution licensee from such projects, or even from approved hydro projects located outside India. Distributed renewable energy refers to smaller projects under 10 megawatts, including solar and other specific renewable sources.

The rules allow flexibility for certain components. Obligations under Wind, Hydro, and Other renewable energy categories are “fungible,” meaning a shortfall in one category can be offset by a surplus in another. The Distributed renewable energy component, however, is non-fungible for deficits, although any excess in this category can be used to cover shortfalls in other components. The notification makes it clear that electricity from nuclear sources is excluded when calculating the RCO for all designated consumers.

Designated users can fulfill their RCO in three ways: by directly consuming renewable electricity, by purchasing or self-generating Renewable Energy Certificates (RECs), or by paying a ‘buyout price’ as set by the Central Electricity Regulatory Commission. Funds collected through the buyout mechanism are earmarked for developing non-fossil fuel energy sources and energy storage capacities.

Compliance will be closely monitored by the Bureau of Energy Efficiency, which will submit regular reports to the Central Government and relevant State Electricity Regulatory Commissions. Any non-compliance, including failure to meet the obligation or providing inaccurate information, will be penalized under the provisions of the Energy Conservation Act, 2001. Additionally, the notification states that existing state-level Renewable Purchase Obligation targets will now be incorporated into these nationwide Renewable Consumption Obligation targets, creating a unified framework for renewable energy adoption across India.

The introduction of the RCO marks a significant step in promoting clean energy, ensuring that designated consumers actively contribute to the country’s renewable energy goals. By gradually increasing the share of renewable energy in electricity consumption, the government aims to foster a sustainable energy ecosystem and reduce dependence on fossil fuels.