The Renewable Consumption Obligation framework in India sets ambitious renewable energy targets for 2030, shifting focus from procurement to consumption.
However, legal ambiguities in the buyout clause and enforcement challenges could hinder its success.
The policy aims to democratise energy production but must address loopholes to ensure effective implementation and genuine renewable energy growth.
India’s Union Ministry of Power has issued a revised draft of the Renewable Consumption Obligation (RCO) framework requiring electricity distribution companies and major industrial consumers to source between 29.91 per cent and 43.33 per cent of their energy from renewable sources by 2030, marking the country's most aggressive push toward clean energy consumption.
The draft notification, released on August 5, 2025 under the Energy Conservation Act 2001, establishes mandatory year-wise renewable energy consumption targets for distribution licensees, open access consumers and captive power users from fiscal year 2024-25 through 2029-30. Unlike previous voluntary mechanisms, RCO creates binding obligations with penalties for non-compliance overseen by the Bureau of Energy Efficiency (BEE).
The framework represents a fundamental shift from India's existing Renewable Purchase Obligation (RPO) system, which focused on procurement, to actual consumption requirements. The policy targets four distinct renewable energy categories, with escalating annual requirements designed to accelerate India's transition away from fossil fuel dependence.
The most significant aspect is the emphasis on distributed renewable energy, defined as projects under 10 megawatts capacity. These targets increase from 1.50 per cent in 2024-25 to 4.50 per cent by 2029-30, representing the steepest growth trajectory among all categories. The distributed component includes rooftop solar, virtual net metering, group metering and behind-the-meter installations.
Wind renewable energy obligations rise from 0.67-3.48 per cent over six years, while hydro requirements increase from 0.38-1.33 per cent. Hydro energy may be fulfilled through projects outside India, subject to central government approval. The largest component, "other renewable sources", encompasses wind and hydro projects commissioned before April 1, 2024, plus biomass co-firing and municipal solid waste projects, growing from 27.35-34.02 per cent.
The framework allows surpluses in wind, hydro and other renewable categories to offset shortfalls among these components. However, distributed renewable energy shortfalls are non-fungible, ensuring dedicated support for decentralised clean energy infrastructure.
Designated consumers can meet obligations through direct renewable energy consumption, purchasing 'renewable energy certificates' (REC), including those from virtual power purchase agreements, or paying a buyout price set by the Central Electricity Regulatory Commission (CERC). Buyout proceeds split equally between central and state energy conservation funds.
The policy acknowledges India’s diverse geographical conditions through differentiated targets for hilly and northeastern states, including Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Jammu & Kashmir, Ladakh, Himachal Pradesh and Uttarakhand. These regions face distributed renewable targets at half the national rate.
RCO covers over 100 electricity distribution licensees and thousands of designated consumers using captive power plants or open access arrangements. For captive users, the framework includes self-consumed electricity, while excluding auxiliary consumption and energy from fossil-fuel waste heat recovery, except for waste heat recovery steam generators in captive gas-based combined cycle plants. Half of self-consumed power from fossil-fuel cogeneration is exempted.
Designated consumers must submit energy accounts for 2024-25 by September 30, 2025 and by July 31 in subsequent years. Compliance reports must be filed by March 31, 2026 for the first year and by October 31 thereafter. Non-compliance attracts penalties under Section 26 of the Energy Conservation Act, with BEE empowered to impose sanctions for both performance shortfalls and procedural violations.
The policy creates substantial demand certainty for renewable energy developers, while potentially attracting increased investment in clean energy infrastructure. The emphasis on distributed projects could democratise energy production, creating opportunities for smaller developers and local communities.
The Union ministry has invited stakeholder comments within 15 days of the August 5, 2025 release date. The notification is deemed effective from April 1, 2024, with all previous actions remaining valid. The implementation will test this regulatory approach in accelerating India's clean energy transition.
Despite its ambitious targets, the RCO notification contains some critical loopholes that could undermine its effectiveness. The most significant legal vulnerability lies in the buyout price mechanism to be specified by CERC. The Energy Conservation Act, 2001 makes no mention of CERC’s role or authority, creating fundamental legal questions about whether this mechanism can withstand judicial scrutiny, as CERC’s powers derive from the Electricity Act 2003, not the Energy Conservation Act.
The enforcement structure presents coordination challenges with three different entities empowered to file non-compliance applications: BEE, state-designated agencies and other state-designated persons. This multiplicity creates potential for conflicting enforcement actions and weakened legal cases due to lack of unified approach.
The buyout mechanism essentially creates a permanent “pay-to-pollute” option without sunset clauses, undermining the objective of actual renewable energy consumption. Unlike Renewable Energy Certificates, which represent genuine renewable generation, buyouts generate no equivalent clean energy.
Historical evidence from RPO implementation reveals systemic enforcement failures, with only six out of 24 audited states imposing penalties despite significant shortfalls, suggesting the RCO framework may face similar challenges.
Additionally, the notification lacks specific timelines for data submission and clear penalties for delayed reporting, creating scope for administrative non-compliance without consequences.