India's RCO 2025: How C&I Consumers Must Adapt to the New 33% Renewable Target

For two decades, India's renewable energy policy was driven by the Renewable Purchase Obligation (RPO) — a state-by-state mandate that required DISCOMs, open access consumers, and captive plants to source a minimum percentage of their electricity from renewable sources. The RPO regime worked, but it was fragmented: each State Electricity Regulatory Commission (SERC) set its own targets, definitions, and compliance enforcement varied widely.

That regime is now being subsumed. The Ministry of Power, exercising powers under the Energy Conservation Act 2001 (as amended in 2022), has notified the Renewable Consumption Obligation (RCO) — a unified national framework that replaces the patchwork of state-level RPOs with a single, escalating compliance trajectory.

The shift from RPO to RCO

The RCO framework is fundamentally different from RPO in three ways:

• National rather than state-level: Targets are set centrally and apply uniformly to all designated consumers across India, regardless of which state they operate in.
• Statutory rather than regulatory: RCO derives its authority from the Energy Conservation Act, not from SERC regulations. This gives it stronger enforcement teeth.
• Consumption-based rather than purchase-based: The obligation attaches to the consumption of electricity, not to the procurement contract — which closes loopholes that some captive consumers had previously exploited.

The escalating target trajectory

The RCO target is expressed as a percentage of total electricity consumption that must come from renewable sources. The trajectory rises steadily:

Financial Year	RCO Target (% of total consumption)
FY 2024–25	29.91%
FY 2025–26	33.01%
FY 2026–27	35.95%
FY 2027–28	38.81%
FY 2028–29	41.36%
FY 2029–30	43.33%

By the end of the decade, designated consumers will need to source more than 43% of their electricity from renewable sources. For energy-intensive industries that have historically relied on conventional grid power, this is a substantial transition — and it cannot be deferred without facing penalties.

Who is covered as a designated consumer

The RCO applies to:

• Distribution licensees (DISCOMs) for the power they supply
• Open access consumers across all states
• Captive generating plants for the electricity they consume from their own captive generation
• Other designated consumers notified under the Energy Conservation Act

Importantly, the obligation flows through to the actual consumer of electricity, not just to the supplier. A captive consumer drawing power from their own SPV is responsible for meeting RCO on that consumption — they cannot rely on their generator to do it for them.

Three pathways to compliance

The RCO framework offers three compliance routes, which can be used singly or in combination:

1. Direct consumption of renewable energy

The most straightforward route — actually procure renewable electricity equal to the required percentage of your consumption. This can be through:

• Open access from solar, wind, hybrid, or other RE generators
• Captive or group captive renewable generation
• Rooftop solar (where it offsets grid consumption)
• Long-term renewable PPAs

2. Purchase of Renewable Energy Certificates (RECs)

For consumers who cannot procure RE directly — for example, due to grid constraints or location — the RCO can be met by purchasing RECs from the Indian Energy Exchange (IEX) or Power Exchange of India (PXIL). Each REC represents 1 MWh of renewable generation. The RECs are then surrendered (extinguished) by the National Load Despatch Centre (NLDC) against the consumer's RCO obligation.

3. Buyout price payment

The Central Electricity Regulatory Commission (CERC) is finalising a buyout price mechanism as a last-resort compliance option. Consumers who fail to meet their RCO through direct consumption or RECs can pay a buyout price (linked to market REC prices) to discharge their obligation. Buyout proceeds are credited to the Central Energy Conservation Fund (75% of which flows to State Energy Conservation Funds) for financing renewable energy and storage projects.

What C&I consumers should do now

The transition to RCO creates both risk and opportunity. Three actions every C&I consumer should take:

1. Audit your current renewable share. Map your existing power procurement against the RCO trajectory. If you're below 29.91% today, you're already non-compliant for FY 2024–25.
2. Lock in long-term renewable contracts. With the target rising 14 percentage points over six years, the cost of compliance via spot REC purchases will likely rise. Bankable long-term solar, wind or hybrid PPAs — or captive structures — provide cost certainty.
3. Consider captive or group captive routes. Captive renewable generation simultaneously meets RCO obligations and exempts you from Cross-Subsidy Surcharge and Additional Surcharge. For high-consumption industrial buyers, this dual benefit makes captive the most efficient compliance path.

The RCO regime is here to stay, and the targets will only rise. C&I consumers who treat compliance strategically — rather than reactively — will turn what looks like a regulatory burden into a long-term cost advantage.