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					</table>The Ministry of Power (<a href="https://powermin.gov.in/" target="_blank" rel="noopener">MoP</a>) has prescribed a renewable energy consumption obligation (RCO) for designated consumers to achieve a 43.33% target by the financial year 2030.
The regulation specifies a minimum share of renewable energy consumption for electricity distribution licensees, open access consumers, and captive users.
The target of 43.33% RCO by FY 2030 comprises 3.48% from wind energy, 1.33% from hydro energy, 4.5% from distributed renewable energy (DRE), and 34.02% from other renewable energy sources.
The RCO has been specified as follows:<a href="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/09/RCO-MoP.png"><img loading="lazy" decoding="async" class="aligncenter wp-image-84973 size-full" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/09/RCO-MoP.png" alt="" width="834" height="309" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/09/RCO-MoP.png 834w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/09/RCO-MoP-300x111.png 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/09/RCO-MoP-768x285.png 768w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/09/RCO-MoP-650x241.png 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/09/RCO-MoP-624x231.png 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/09/RCO-MoP-600x222.png 600w" sizes="auto, (max-width: 834px) 100vw, 834px" /></a>
For hilly and North-Eastern states and union territories, including Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand, Jammu and Kashmir, and Ladakh, the distributed renewable energy (DRE) obligation will be at 50% of the specified RCO levels.
For distribution licensees catering exclusively to urban consumers, the DRE obligation will be 75% of the specified RCO level.
The balance share of the DRE component for these states and union territories will be adjusted under the “other renewable energy” component obligation.
The wind energy obligation must be met through power generated from wind projects commissioned after March 31, 2024.
Similarly, the hydro energy obligation must be met through power generated from hydro projects commissioned after March 31, 2024. The RCO obligation requirement can also be met through the free power allotted to states or distribution licensees from such projects.
In addition, the RCO obligation can be met from hydro power projects located outside India on a case-by-case basis.
The DRE obligation must be met from renewable energy projects with a capacity of up to 10 MW. These projects can include solar installations of all configurations, such as net metering, gross metering, virtual net metering, group net metering, and behind-the-meter systems, as well as any other renewable energy sources notified by the Central Government.
The RCO obligation under the other renewable energy component can be met from renewable energy projects other than wind and hydro projects commissioned after March 31, 2024. It must also not include projects included under the DRE obligation component.
The hydro power projects included under the other renewable energy obligation component must be commissioned before April 1, 2024. It can also include projects co-firing biomass pellets and charcoals produced from municipal solid waste.
The shortfalls in RCO under wind, hydro, and other renewable energy can also be met through surpluses from other obligation components.
Surpluses from other RCO components cannot meet the DRE component&#8217;s requirements; however, surpluses from DRE can be used to offset the shortfall in other RCO components.
Open Access Consumers
Open access consumers and captive users identified as designated consumers can meet their total RCO from any renewable energy source.
For open access consumers, the obligation will include power consumption at the point of drawal from the grid.
For captive users, the RCO will apply to electricity generated and self-consumed, excluding auxiliary consumption.  The RCO will exclude 50% of the electricity generated and self-consumed from fossil fuel-based cogeneration power projects, as well as 50% of the fossil fuel-based electricity consumed in aluminum smelters.
The RCO can also be fulfilled by consuming power through an energy storage system.
Alternatively, RCO can also be met by purchasing or through self-generated renewable energy certificates (RECs) issued under the Central Electricity Regulatory Commission’s (CERC) regulations.
It can also be met by RECs acquired through Virtual Power Purchase Agreements.
The RCO can be met by paying the buyout price determined by the CERC.
The payment received through the buyout mechanism must be credited to the Central Energy Conservation Fund, and 75% of the fund must be transferred to the state energy conservation fund.
The fund will support the development of specified renewable energy sources and storage capacities.
Compliance with the RCO under the DRE obligation will be measured in kilowatt-hours (kWh) units. If generation data is unavailable, the reported capacity will be converted into energy generation using a multiplier of 4 kWh per kilowatt per day.
Distribution Licensees
For distribution licensees classified as designated consumers, the RCO will be calculated based on the total electricity supplied to consumers within the distribution licensee&#8217;s service area.
The calculation will exclude power consumed by open access users sourcing electricity from outside the distribution licensee, as well as electricity generated and captive consumption of power.
The RCO compliance for multiple designated consumers under common control will be considered on an aggregate basis, at the holding company level as defined in the Companies Act, 2013, or at the level of a cooperative society registered under the relevant Co-operative Societies Act.
Designated consumers must submit their certified energy accounts for the year 2024–2025 by October 31, 2025, and by July 31 for each subsequent year.
Any shortfalls in meeting the RCO after the purchase of RECs or payment of the buyout price must be reported in a compliance report by March 31, 2026, for the 2024–2025 year, and by December 31 for the following year.
In March 2025, MoP <a href="https://www.mercomindia.com/government-proposes-flexibility-in-renewable-energy-consumption-obligation" target="_blank" rel="noopener">proposed</a> amendments to refine the regulatory framework governing renewable energy consumption by designated consumers, including electricity distribution licensees, open access consumers, and captive users. The Bureau of Energy Efficiency will oversee the compliance and submit periodic reports to the government.
Subscribe to Mercom’s real-time <a href="https://www.mercomindia.com/product/mercoms-renewable-energy-regulatory-updates" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don’t miss any critical updates from the renewable industry.

Government Issues RCO Compliance Regime for Designated Consumers

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					</table>With the growing demand for power from data centers in the country, project developers are increasingly recognizing battery energy storage systems (BESS) as a vital component of renewable energy projects in the coming years.
At a discussion on “How Industries and Commercial (C&amp;I) Units Are Pursuing Green Growth” held at the <a href="https://www.mercomindia.com/event/renewables-summit-2025" target="_blank" rel="noopener">Mercom India Renewables Summit 2025</a> on July 25, 2025, panelists shared their insights on how AI and data centers will drive demand for renewables.  They also forecast that the demand for renewable energy from the C&amp;I sector will keep increasing.
The panelists were Kartikeya Narain Sharma, Co-Founder and Chief Business Officer at <a href="https://sunsure-energy.com/" target="_blank" rel="noopener">Sunsure Energy</a>; Vinay Vyas, CEO (EPC Business) at <a href="https://enrichenergy.com/" target="_blank" rel="noopener">Enrich Energy</a>; Birendra Pandey, Head at Energy Commercialization at <a href="https://enfinity.global/" target="_blank" rel="noopener">Enfinity Global India</a>; and Divanshu Gupta, BU Head at <a href="https://hartek.com/" target="_blank" rel="noopener">Hartek Group</a>.
Priya Sanjay, Managing Director, Mercom India, moderated the session.
Vinay Vyas said that 56% of the electricity requirement comes from the C&amp;I segment. The rooftop solar segment accounts for more than 65% of the demand from this segment.
Kartikeya Sharma said that the Ministry of Power had requested states to focus on reducing daytime pricing.  Such a move will encourage more project developers to opt for hybrid power projects.
“As more solar is injected into the grid, the daytime pricing will get dampened, and people will move away from banking. We (the company) have moved entirely to hybrid solutions. Except for states with no wind potential, we are considering wind-solar hybrid projects. Our interstate transmission system (ISTS) projects will also be wind-solar hybrid projects,” he said.
Rising Demand from Data Centers
The panelists said demand from data centers would require substantial amounts of renewable energy, especially in states like Tamil Nadu, Maharashtra, and Telangana.
Birendra Pandey said most data centers funded by international investors are required to reduce their carbon footprint. “Before they plan their infrastructure for data centers, they also plan their renewable energy footprint. This will be one of the biggest drivers of demand for renewable energy from data centers.”
The demand from data centers is expected to surpass that of the steel industry. They will be the country’s largest consumers of electricity.
Sharma said the need for data center localization drove the first wave of data centers in India. The next wave will come from AI and the proliferation of the internet.
He also highlighted the challenge of supplying power to these data centers. “Unlike typical C&amp;I customers with a running load, data centers have a ramping upload. Every three months, they will add 5 MW, which translates to at least 10 MW of renewable energy. When you work with data centers, you need to have a running pipeline of power projects to sell power in the short term while waiting for the data centers to ramp up their power.”
He said policy uncertainty can make it difficult for renewable power project developers to operate pipeline projects to meet the demand from data centers.
Sharma said solar developers are increasingly moving away from plain wind-solar projects. “Given the contracted BESS capacity of 40 GWh, only a few of that capacity has become operational. It&#8217;s only a matter of 18-24 months, when you see 25 GWh of BESS in operation across different modes—states, interstate transmission networks, and behind-the-meter projects.”
Coupled with the states’ need to reduce daytime pricing, Sharma said BESS had found a niche to make BESS commercially viable.
Divanshu Gupta talked about demand from power-intensive industries such as steel and textiles in Punjab. He said these companies were shifting to solar energy and were demanding energy storage too. “Consumers are asking us to build 50 MW projects with a minimum of 5-10 MW of energy storage. Companies don’t want to bank their power with distribution companies (DISCOMs) or an additional 20% course in their nighttime.”
He added that companies in Punjab are also choosing off-site captive power projects.
The panelists focused on the inclusion of more aggregators of containerized battery storage solutions in the market, along with ramping up capacities. This will enable operational efficiency and reduce costs.
Gupta spoke about the growing awareness of renewable energy among C&amp;I consumers. They had realized that behind-the-meter projects are more viable.
“Recently, we commissioned an 8 MW project for Coca-Cola in Jammu and Kashmir, and they were not connected to the grid. To assist our customers, we have added energy storage. The stored energy would meet the power needed for construction and would also provide self-reliance to the consumer after construction,” he added.
Gutpa said even the residential sector had come to understand the futility of relying on banking power and the benefits of storing energy and utilizing it.
Slow Adoption of VVPAs
As a differentiator in the market, Vyas added that his company was providing firm power for particular time slots. Virtual power purchase agreements (VPPA) were also gaining traction.
Pandey said that multiple multinational offtakers have shown interest in VPPAs.
“Earlier, there were companies like Amazon that worked out a strike price for green attributes, and the brown power was sold at the exchange. Now, we see a policy coming in for VPPA. It&#8217;s still new, and the policy must be understood. However, some large VPPA deals have already been concluded, and in the future, multinationals will have greater confidence in Indian power project developers&#8217; ability to consistently deliver VPPAs. This will also mature the power trading market, and developers would show more risk in trading,” he said.
Sharma added that sleeved PPAs, popular in European and U.S. markets, are set to enter the Indian power market. “For on-time delivery of power, we develop short-term power projects before we supply the long-term power projects. In this case, the customer wants to ensure power delivery but is willing to cover the costs until the power comes online.”

Data Centers to Become Largest Consumers of Renewable Energy

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