CERC sets RCO buyout price at Rs 347 per MWh

The Central Electricity Regulatory Commission (CERC) has finalised the buyout price mechanism as an alternative compliance route for Renewable Consumption Obligations (RCO), fixing the rate at Rs 347 per MWh for fiscal years 2024-25 and 2025-26. The order, issued on February 18, 2026, follows a suo-motu petition and a detailed stakeholder consultation process.

The Ministry of Power (MoP), through a notification dated September 27, 2025, specified minimum renewable energy consumption shares for designated consumers, including distribution licensees, open access consumers and captive users. The notification outlined three compliance pathways: direct renewable consumption, with or without storage; purchase or self-generation of Renewable Energy Certificates (RECs); and payment of a buyout price determined by CERC. Amounts collected through the buyout route will be credited to the Central Energy Conservation Fund, with 75% transferred to respective State Energy Conservation Funds to support renewable energy and storage capacity development.

For price determination, CERC reviewed 53 stakeholder submissions and held a public hearing on December 29, 2025. The Commission based the buyout price on weighted average REC prices across Indian Energy Exchange (IEX), Power Exchange India Limited (PXIL) and Hindustan Power Exchange (HPX), along with bilateral transactions executed through licensed traders. The analysis covered the 12-month period from December 2024 to November 2025. The weighted average REC price for this period was Rs 346.74 per MWh, leading CERC to set the buyout price at Rs 347 per MWh for FY 2024-25 and FY 2025-26. For subsequent years up to FY 2029-30, the price will increase annually by 5%: Rs 364 for FY 2026-27, Rs 382 for FY 2027-28, Rs 401 for FY 2028-29 and Rs 421 for FY 2029-30.

Stakeholders raised concerns over the initially proposed price of Rs 245 per MWh, calculated at 105% of the FY 2024-25 weighted average REC price of Rs 232.84, stating that it could weaken long-term renewable procurement signals. Some participants indicated that a lower buyout price could effectively cap REC prices, reduce REC demand and affect investment signals for renewable generators. Distribution companies highlighted the risk of higher compliance costs being reflected in retail tariffs, while the fertiliser sector requested relief from premium pricing due to its regulated operating conditions. CERC noted that REC prices have risen in recent months and therefore adopted a market-linked methodology based on the most recent 12-month weighted average.

On the compliance framework, CERC clarified that its mandate is limited to specifying the buyout price as required under the MoP notification. The Commission stated that it neither intends to establish a hierarchy among the three compliance methods nor has the authority to do so.

The buyout price mechanism has been positioned as a transitional compliance option and will remain applicable until FY 2029-30 unless reviewed by CERC. The order does not define detailed procedures for collection and utilisation of funds, noting that these aspects fall outside the scope of the present proceeding.

In terms of market context, CERC recorded that during FY 2024-25, REC transactions reached 304.18 lakh units on power exchanges at a weighted average price of Rs 225.36 per MWh, and 38.91 lakh units through trading licensees at Rs 291.32 per MWh. This resulted in an overall weighted average REC price of Rs 232.84 per MWh for the fiscal year.