CERC Proposes 105% Buyout Price for Renewable Energy Compliance

The Central Electricity Regulatory Commission (CERC) has proposed a new mechanism for designated energy consumers to comply with their Renewable Consumption Obligation (RCO). The commission suggests that if consumers cannot meet their RCO through direct consumption of renewable energy or by purchasing Renewable Energy Certificates (RECs), they can opt for a "buyout price." This price has been proposed to be set at 105% of the weighted average REC price for the fiscal year. The primary aim of this proposal is to incentivize direct investment in renewable energy sources (RES) and REC purchases, which directly contribute to capacity addition, rather than relying on the buyout option. The Indian government has set ambitious targets for RES, aiming for 29.91% of total electricity usage by designated consumers in FY25, rising to 43.33% by FY30, as part of the broader goal of 500 GW non-fossil fuel capacity by 2030. The CERC believes that setting the buyout price at a premium over REC prices will encourage obligated entities to pursue the preferred options first. The buyout price calculation will also reflect green attribute costs and electricity component costs separately. Designated consumers, including Discoms, Open Access customers, and captive users, can provide their feedback on this proposal to the CERC by November 21, 2025.

Impact: This news is significant for the Indian energy sector, particularly for renewable energy developers and obligated consumers. By making the buyout option more expensive, it pushes demand towards direct RE consumption and REC markets, potentially boosting investment in solar, wind, and hydro projects. This could accelerate India's transition towards cleaner energy and help meet its climate targets. The move might also impact the cost structure for designated consumers. Rating: 8/10

Difficult Terms Explained: * **Central Electricity Regulatory Commission (CERC)**: A statutory body in India that regulates the electricity sector, including tariffs, wholesale trading, and inter-state transmission. * **Renewable Consumption Obligation (RCO)**: A regulatory requirement for designated consumers to source a minimum percentage of their electricity from renewable energy sources. * **Renewable Energy Certificate (REC)**: A market-based instrument that certifies the generation of one megawatt-hour (MWh) of electricity from a renewable energy source. It allows generators to earn extra revenue, and obligated entities to meet their RCO. * **Weighted Average Price**: The average price of RECs, calculated by taking into account the volume or price of RECs traded throughout the year. * **Buyout Price**: A price set by the regulator that designated consumers pay as an alternative to meeting their RCO through direct consumption or REC purchase. * **Designated Energy Consumers**: Entities mandated by law to meet a certain percentage of their electricity consumption from renewable sources. This typically includes Discoms, large industrial users (captive users), and commercial entities drawing power through open access. * **Discoms**: Distribution Companies, responsible for supplying electricity to end-consumers in specific areas. * **Open Access Customers**: Consumers who are allowed to use the transmission/distribution network of a utility to draw power from an alternative supplier. * **Captive Users**: Industrial or commercial entities that generate their own electricity for their consumption. * **Renewable Energy Sources (RES)**: Energy derived from natural resources that replenish themselves, such as solar, wind, hydro, and biomass.