The Central Electricity Regulatory Commission (CERC) has determined the buyout price as an alternative compliance mechanism for electricity distribution licensees, open access consumers, and captive consumers to meet the renewable consumption obligation (RCO) requirements notified by the Ministry of Power.

The Commission determined the buyout price at ₹347 (~$3.83)/MWh for the financial years (FY) 2024–25 and 2025–26, based on the weighted-average renewable energy certificate (REC) price of ₹346.74 (~$3.82)/MWh for the period from December 2024 to November 2025.

From FY 2026–27 onwards, the buyout price will increase annually by 5%, reaching ₹364 (~$4.01)/MWh in FY 2026–27, ₹382 (~$4.21)/MWh in FY 2027–28, ₹401 (~$4.42)/MWh in FY 2028–29, and ₹421 (~$4.64)/MWh in FY 2029–30.

The determined prices will remain in force until FY 2029–30.

Background

The Ministry of Power specified minimum renewable energy consumption shares for designated consumers, including distribution licensees, open access consumers, and captive users.

The notification provided three mechanisms for compliance: direct consumption of renewable electricity, including through storage; purchase or self-generation of RECs; and payment of a buyout price determined by CERC.

Funds collected through the buyout mechanism will be credited to the Central Energy Conservation Fund, with 75% transferred to State Energy Conservation Funds to support renewable energy and storage deployment.

Following the notification, CERC initiated suo motu proceedings and issued a proposal on October 22, 2025, suggesting a buyout price of ₹245 (~$2.70)/MWh for FY 2024–25, calculated as 105% of the weighted average REC price of ₹232.84 (~$2.57)/MWh, and proposed linking future prices to 105% of the weighted average REC price of the respective financial year.

Some stakeholders argued that a buyout should be a last resort after exhausting renewable procurement and REC purchases, while others stated that the notification did not establish any hierarchy.

Stakeholders also sought clarity on reporting procedures, audit requirements, compliance timelines, GST applicability, and publication of REC price data.

Concerns were raised that a low buyout price could discourage renewable procurement and suppress REC prices, while a high buyout price could increase compliance costs and affect distribution company finances and retail tariffs.

Price Determination

The Commission clarified that it does not intend to create any hierarchy among the three compliance mechanisms, as the Ministry of Power notification provides them as alternative options, and CERC’s mandate is limited to determining the buyout price.

It also stated that procedural aspects, enforcement mechanisms, and fund utilization are outside the scope of the present order.

To determine the buyout price, the Commission adopted a market-linked approach and considered weighted-average REC prices from the Indian Energy Exchange, Power Exchange India, and Hindustan Power Exchange, as well as bilateral trades conducted through traders.

Based on the weighted-average REC price of ₹346.74 (~$3.82)/MWh for the latest 12-month period from December 2024 to November 2025, the Commission determined the buyout price at ₹347 (~$3.83)/MWh for FY 2024–25 and FY 2025–26.

It decided to apply a fixed annual escalation of 5% from FY 2026–27 to provide regulatory certainty and predictability for compliance planning.

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