Centre issues revised RCO targets under Energy Conservation Act

The Ministry of Power has circulated a revised draft notification specifying Renewable Consumption Obligation (RCO) requirements under the Energy Conservation Act, 2001. Issued on 5 August 2025, the draft is open for stakeholder feedback until 19 August. It replaces the previous version dated 20 October 2023.

The RCO framework outlines annual minimum shares of electricity to be sourced from renewable energy by designated consumers. These include distribution licensees, open access users, and captive consumers. For open access and captive categories, RCO applies only to electricity not procured from Discoms. The notification takes effect from 1 April 2024.

The obligations are divided into four segments: wind, hydro, distributed renewable energy (DRE), and other renewable energy. The total RCO target rises from 29.91 per cent in 2024–25 to 43.33 per cent by 2029–30. DRE obligations are fixed and cannot be offset, though any surplus can compensate for shortfalls in other categories. Wind, hydro, and other renewables are fungible.

DRE applies to renewable systems under 10 MW capacity and includes net metering, gross metering, virtual and group metering, behind-the-meter setups, and other configurations notified by the Centre. Hilly and Northeastern states are subject to half the DRE requirement listed in the notification, with the remaining share reallocated to their ‘other renewables’ category.

Energy from nuclear power, certain fossil-based waste heat recovery processes, and a portion of fossil-fuel-based cogeneration are excluded from the RCO calculation. Waste heat recovery is only eligible when generated through steam systems in combined-cycle gas-based captive units. Captive generation from industrial by-product gases or residual energy recovery is also excluded.

The notification includes calculation methods with worked examples. For instance, a designated consumer’s adjusted consumption excludes nuclear sources, qualifying fossil-based generation, and discom-supplied electricity. A separate example illustrates RCO compliance calculations for Discoms.

Designated consumers may meet their RCO targets through direct consumption of renewable electricity, purchase of Renewable Energy Certificates (RECs), including those acquired via Virtual Power Purchase Agreements (VPPAs), or payment of a buyout price specified by the Central Electricity Regulatory Commission (CERC). Funds collected via the buyout route will be deposited in the Central Energy Conservation Fund, with half redirected to respective State-level funds.

Entities under common ownership, as defined by the Companies Act, may report aggregated RCO compliance at the holding company level.

The Bureau of Energy Efficiency (BEE) will monitor compliance. Designated consumers must submit energy accounts for FY 2024–25 by 30 September 2025, and file their compliance reports, including any RECs or buyouts, by 31 March 2026. From FY 2025–26 onwards, energy accounts must be filed by 31 July and compliance reports by 31 October each year.

Non-compliance, delayed or inaccurate submissions, or failure to provide required information may attract penalties under Section 26 of the Act. Adjudicating Officers may initiate proceedings on their motion. BEE may also release implementation guidelines.