The Indian government has introduced a Renewable Energy Obligation (RCO) framework, which sets targets for renewable energy consumption by designated consumers. The targets vary by renewable energy source, with wind energy obligations increasing from 0.67% to 3.48% over six years, and hydro energy requirements rising from 0.38% to 1.33% over the same period. Hydro energy can be sourced from projects outside India, subject to central government approval.
The largest component of the RCO framework is “other renewable sources”, which includes wind and hydro projects commissioned before April 1, 2024, as well as biomass co-firing and municipal solid waste projects. This category has a target range of 27.35% to 34.02%. The framework allows surpluses in one renewable energy category to be used to offset shortfalls in another, but distributed renewable energy shortfalls must be met separately to ensure dedicated support for decentralized clean energy infrastructure.
Designated consumers can meet their RCO targets through direct renewable energy consumption, purchasing renewable energy certificates (RECs), or paying a buyout price set by the Central Electricity Regulatory Commission (CERC). The buyout proceeds are split equally between central and state energy conservation funds. The policy takes into account India’s diverse geographical conditions and sets differentiated targets for hilly and northeastern states, which face lower distributed renewable energy targets.
The RCO framework applies to over 100 electricity distribution licensees and thousands of designated consumers who use captive power plants or open access arrangements. The framework includes self-consumed electricity for captive users, but excludes 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.
To ensure compliance, designated consumers must submit energy accounts and compliance reports by specific deadlines. Non-compliance attracts penalties under the Energy Conservation Act, and the Bureau of Energy Efficiency (BEE) is empowered to impose sanctions for both performance shortfalls and procedural violations. Overall, the RCO framework aims to promote the development and use of renewable energy in India, while taking into account the country’s diverse geographical conditions and energy needs.