CERC Fixes ₹245/MWh Buyout Price for Renewable Consumption Obligations

In a major step to support India’s renewable energy transition, the Central Electricity Regulatory Commission (CERC) has issued a Suo-Motu order fixing the “Buyout Price” for meeting Renewable Consumption Obligations (RCO). This new provision offers a third compliance route for designated consumers such as electricity distribution companies (DISCOMs), open access users, and captive power consumers to achieve their green energy targets.

Under the present rules, obligated entities can meet their RCO by directly consuming renewable power or by purchasing Renewable Energy Certificates (RECs). With the new mechanism, they now have the option to pay a defined buyout price. The commission clarified that this buyout price represents only the “green attribute” of renewable electricity in an unbundled form. This means entities choosing this option must still separately procure their actual electricity requirement from any source.

For the financial year 2024-25, CERC has set the buyout price at ₹245 per MWh. The commission calculated this amount by taking the weighted average price of RECs traded on power exchanges and through trading licensees, which was ₹232.84 per MWh, and adding a 5 percent premium. For the years up to 2029-30, CERC has decided that the annual buyout price will be fixed at 105 percent of the weighted average REC price of the previous financial year. This formula aims to bring predictability and transparency to the mechanism.

The proposal attracted strong reactions from 53 stakeholders during consultations. Several renewable energy developers and power exchanges expressed concern that a lower buyout price could act as a soft cap on REC prices. They argued that if the buyout price remains close to the market price of RECs, obligated entities may prefer paying the buyout amount instead of purchasing RECs, which could reduce demand in the REC market. Some stakeholders suggested that the premium over the weighted average REC price should be increased to as much as 25 percent to ensure that the buyout option remains a last resort.

On the other hand, DISCOMs and representatives from energy-intensive industries such as fertilizers supported a lower buyout price. They argued that a higher price would increase compliance costs and eventually lead to higher retail electricity tariffs for consumers.

CERC stated that its intention is not to create any hierarchy among the three compliance routes but to provide a fair and transparent alternative. To maintain clarity, the National Load Despatch Centre (NLDC) has been directed to publish the weighted average REC price and the corresponding buyout price for the next year by April 30 each year.

Importantly, the funds collected through this mechanism will be credited to the Central Energy Conservation Fund. Out of this amount, 75 percent will be transferred to State Energy Conservation Funds. These funds will be used to support renewable energy development and storage capacity at the state level. Through this structure, even when entities opt for the buyout route, the financial resources will continue to support India’s long-term goal of increasing the share of non-fossil fuel energy in its overall power mix.