Renewable Consumption Obligations In India: Legal Reforms And Their Impact On Energy Transition

Introduction

The Ministry of Power notification dated 27th September 2025¹ marked a defining moment in India's renewable energy and climate action journey, introducing a sweeping overhaul to the Renewable Consumption Obligation (RCO) framework under the Energy Conservation Act of 2001. This regulatory transformation is crafted in close consultation with the Bureau of Energy Efficiency to address both the urgency and complexity of India's energy transition. The notification supersedes earlier provisions on Renewable Purchase Obligations (RPOs), shifting focus from mere procurement to the actual consumption of renewable energy within the ambit of the law, and sets the stage for the next phase of growth in the clean energy sector. By specifying legally binding minimum shares of renewable energy as a percentage of total electricity consumption for various classes of consumers, this notification aims to operationalise India's climate commitments, reduce carbon emissions, and chart a clear pathway toward net-zero targets. The provisions apply not only to electricity distribution licensees, the companies that manage public grid supply, but also cover open access power consumers (businesses and industries that purchase electricity directly from producers) and captive users who generate their own electricity independently of the public grid. The notification clearly states that these groups must get a set portion of their electricity from renewable sources. This includes not only electricity purchased from the grid but also power generated on-site or nearby, such as rooftop solar panels, biogas units, small wind turbines, and local mini-grid systems.

The new regime establishes an incremental, year-wise compliance trajectory, with percentages rising systematically from 29.91% in FY 2024-25 to 43.33% by FY 2029-30. Unlike past frameworks, the notification details component-level targets for wind, hydro, distributed renewable energy (DRE, under 10 MW), and other renewables, ensuring a diversified energy portfolio while incentivizing decentralized and innovative solutions, such as rooftop solar and mini-grids. The notification addresses the country's vast regional and consumer diversity, providing tailored relaxations for hilly and North-Eastern states as well as urban-centric distribution licensees, and implementing special inclusion/exclusion rules for technological, geographic, and operational nuances. The goal of these significant changes is to accelerate India's transition away from fossil fuels toward cleaner energy sources. They aim to strengthen energy security and encourage fresh investment in renewable technologies that will power a sustainable future. By establishing new compliance pathways, including direct renewable consumption, the purchase or generation of Renewable Energy Certificates (RECs), and, where necessary, the payment of a buyout price to support additional renewable capacity, the notification ensures that progress is real, measurable, and adaptable to individual circumstances. The Bureau of Energy Efficiency, along with designated auditing firms, plays a central role in enforcing the new standards, monitoring compliance, and supporting transparent reporting mechanisms that are crucial for national and international accountability.

This notification consolidates legislative, technical, and market mechanisms to establish an integrated, future-proof framework for renewable energy consumption in India. It is a strategic response to global climate imperatives, a driver of domestic innovation, and a signal to industry, investors, and citizens that the era of clean, accountable, and inclusive energy is here.

Background

The recent notification, which replaces the earlier notification (S.O. 4617(E) dated 20th October 2023), has been issued by the Ministry of Power under the authority granted by clauses 'n' and 'x' of Section 14 of the Energy Conservation Act, 2001, following consultations with the Bureau of Energy Efficiency (BEE). This update marks a significant step forward in India's clean energy policies, reflecting the government's ongoing efforts to accelerate the transition to renewable and non-fossil energy sources. By broadening the scope of the Energy Conservation Act, the amendment aims to integrate sustainability into the operations of industrial, commercial, and public utility sectors. It promotes responsible energy use and ensures stronger adherence to renewable energy obligations. Furthermore, the framework is closely aligned with India's commitments under the Paris Agreement and the Mission LiFE (Lifestyle for Environment) initiative. Together, these measures create a cohesive approach that links legal frameworks and institutional efforts with the nation's long-term goal of reducing carbon intensity and strengthening energy security through cleaner and more diversified power sources.

Renewable Consumption Obligation (RCO) Compliance Targets and Year-wise Obligations

A central feature of the notification is the detailed year-wise specification of minimum renewable energy obligations, expressed as a percentage of total electricity consumption, which progressively increase each year up to FY 2029–30, thereby establishing a structured and incremental pathway for renewable energy integration across four major categories: wind energy, hydro energy, distributed renewable energy (DRE), and other renewable energy sources such as biomass and municipal solid waste ensuring a diversified and balanced approach towards achieving India's long-term clean energy and sustainability goals.²

* For hilly and North-Eastern States and Union territories, namely, Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand, Union territory of Jammu and Kashmir, and Union territory of Ladakh, the Distributed renewable energy obligation shall be 50% of the level specified in the Table. For distribution licensees serving exclusively urban consumers, the Distributed renewable energy obligation shall be 75% of the specified level. The remaining distributed renewable energy component obligation for these States and Union territories shall be included in the other renewable energy component.

Category-specific and Technical Requirements

The category-specific and technical requirements under the new renewable compliance framework specify that the Wind Energy obligation shall apply exclusively to projects commissioned after 31st March 2024.

• The Hydro Energy obligation encompasses power generated from projects commissioned after 31st March 2024, including free power allocations made to States and qualifying hydro power procured from approved foreign projects.
• The Distributed Renewable Energy (DRE) category encompasses renewable energy projects with a capacity of up to 10 MW. These projects cover different types of small-scale solar setups and other decentralized renewable sources. If there's a shortfall in meeting DRE targets, it can't be made up by other categories, but any extra DRE energy can be used to cover shortfalls elsewhere; and
• The Other Renewable Energy segment encompasses all renewable sources not explicitly defined above, including biomass co-firing and electricity generated from municipal solid waste. The Renewable Consumption Obligation (RCO) for each of these categories shall be calculated based on a detailed methodology outlined in the framework, supported by illustrative examples tailored to different types of consumers, including distribution licensees, open-access users, and captive power producers.

Mechanisms for Renewable Consumption Obligation (RCO) Fulfilment

Designated consumers can meet their Renewable Consumption Obligation (RCO) through multiple mechanisms, including direct consumption of renewable electricity either generated on-site or procured through the grid, with or without the use of storage systems purchasing or self-generating Renewable Energy Certificates (RECs), including those obtained via Virtual Power Purchase Agreements (VPPAs), or by paying a prescribed "buyout price" in cases where direct compliance is not feasible; the funds collected through this buyout mechanism are earmarked for augmenting renewable energy and storage capacity, with structured allocation between the central and state energy conservation funds, thereby ensuring that while the mechanism offers flexible compliance options to consumers, it simultaneously promotes financial accountability and incentivizes genuine transition toward renewable energy rather than mere certificate-based fulfilment.

Compliance, Monitoring, and Reporting

Compliance under the framework is monitored by the Bureau of Energy Efficiency, with support from periodic reporting to both Central and State Electricity Regulatory Commissions, and the notification prescribes a standardized format³ and deadlines for submissions, requiring energy accounts for FY 2024-25 to be submitted by 31st October 2025, shortfall resolution reports, including REC purchases or buyout payments, by 31st March 2026, while for subsequent years, submissions are to be made by 31st July and 31st December respectively, and aggregate-level compliance is permitted for entities under common control, such as holding companies or cooperative societies, thereby ensuring systematic monitoring, accountability, and coordinated reporting across all applicable entities.

Penalties and Enforcement

Under the issued notification, persistent or material non-compliance arising from shortfalls, missed reporting, or submission of inaccurate data triggers penal provisions under sub-section (3) of section 26 of the Energy Conservation Act, 2001, thereby empowering the Bureau and state agencies to initiate penalty proceedings through well-defined regulatory process frameworks, while simultaneously clarifying that designated consumers are not required to meet any additional Renewable Purchase Obligations under the Electricity Act, 2003, as state-level targets are subsumed within the Renewable Consumption Obligation (RCO) requirements.

Conclusion

The Ministry of Power Renewable Consumption Obligation (RCO) notification represents a major step forward for India's clean energy policy. It combines clear legal requirements, technical specifics, and market tools into a single framework that covers all major electricity users. The rules set gradually increasing renewable energy targets from 2024-25 through 2029-30, ensuring steady growth in the use of green energy. The approach supports a balanced energy mix, encouraging both large-scale projects and smaller, distributed options, such as rooftop solar and mini-grids, which reflect the diverse needs and geography of India's power sector. Three strategic intentions support the structure, that is, climate alignment ensuring India's domestic legal framework directly supports international commitments like the Paris Agreement goals, national programs like Mission LiFE, and wider net-zero transitions; market transformation propelling private sector financing, innovation, and technology adoption through explicit, binding consumption requirements supplemented with adaptable compliance arrangements; and regulatory clarity offering rules transparency, format-based reporting templates, stated compliance deadlines, and proportionate fines, while at the same time evading regulation duplication by folding state-level Renewable Purchase Obligations (RPOs) into the RCO framework. The notice allows compliance via several routes, such as direct renewable energy use, buying of Renewable Energy Certificates (RECs), signing of Virtual Power Purchase Agreements (VPPAs), or buyout payments structured on a buyback into further renewable capacity, revealing policy adaptability without loss of accountability, coupled with region-specific relaxations for geography- and operationally different areas like hilly and North-Eastern states, and urban consumers, thus revealing regulatory responsiveness to varied ground realities. The enforcement function mandated to the Bureau of Energy Efficiency, coupled with oversight from the State and Central Electricity Regulatory Commissions, places the RCO framework in the position of a tool for national accountability as well as international credibility, closing the gap between high-sounding policy announcements and measurable on-the-ground achievements, and sending a substantial signal to foreign investors, domestic industry, and the Indian people that India's power sector is moving into an age of clean, responsible, and inclusive energy use. Essentially, the notice is not so much a compliance mandate as it is a holistic strategic roadmap meant to speed up India's energy transition, inculcate sustainability in the very fabric of economic development, enhance national energy security, and create a future-proof renewable energy portfolio to drive long-term environmental, social, and financial goals.

Footnotes

1. https://egazette.gov.in/(S(msnsvpk3bke0tkryuymmdskp))/ViewPDF.aspx (Gazette ID :- CG-DL-E-29092025-266517)

2. https://egazette.gov.in/(S(msnsvpk3bke0tkryuymmdskp))/ViewPDF.aspx (Gazette ID :- CG-DL-E-29092025-266517) (See Paragraph 2, Page No:-9)

3. https://egazette.gov.in/(S(msnsvpk3bke0tkryuymmdskp))/ViewPDF.aspx (Gazette ID :- CG-DL-E-29092025-266517) (See ANNEXURES, Page No:-11,12)

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