CERC Fixes RCO Buyout Price at INR 347/MWh, Allows 5 Percent Annual Escalation
The Central Electricity Regulatory Commission has fixed the RCO buyout price at INR 347/MWh for FY25–FY26, based on an INR 346.74/MWh weighted average REC price, with a 5 percent annual escalation approved through FY30.
February 20, 2026. By Mrinmoy Dey
The decision was issued through a suo-motu order in Petition No. 12/SM/2025, following the Ministry of Power’s September 2025 notification that introduced buyout payments as one of the compliance mechanisms.
The RCO framework allows obligated entities, including discoms, open access consumers, and captive users, to fulfil their renewable targets through direct consumption of green power, purchase of Renewable Energy Certificates (RECs), or payment of a buyout price. CERC clarified that these three options are non-hierarchical, in line with the policy issued by the Ministry of Power, and that the Commission has no mandate to treat the buyout route as a fallback option. Several stakeholders had sought clarity on prioritisation, arguing that buyouts should be permitted only after exhausting renewable procurement and REC purchases, but the regulator rejected this approach.
In determining the price, CERC analysed REC trading data from December 2024 to November 2025 across major power exchanges and bilateral trades. The Commission considered transactions on the Indian Energy Exchange, Power Exchange India, and Hindustan Power Exchange, along with volumes traded through licensed power traders. Based on this, the weighted average REC price was calculated at INR 346.74/MWh, which was rounded off to INR 347/MWh and adopted as the buyout price for the first two years.
For the period from FY 2026-27 to FY 2029-30, CERC has approved a 5 percent annual escalation in the buyout price to provide regulatory certainty. Accordingly, the buyout price will rise to INR 364/MWh in FY 2026-27, INR 382/MWh in FY 2027-28, INR 401/MWh in FY 2028-29, and INR 421/MWh in FY 2029-30. The Commission said this forward-looking approach would help obligated entities plan their compliance strategies while maintaining alignment with market trends. The buyout mechanism will remain in force until FY 2029-30 unless reviewed earlier.
The order follows extensive stakeholder consultations, with 53 organisations submitting written comments and several participating in a public hearing in December 2025. Industry players, renewable developers, exchanges, and utilities expressed divergent views on the proposed pricing.
Many argued that a 5 percent premium over average REC prices was too low and could discourage long-term renewable procurement and suppress REC demand. Others, particularly discoms and energy-intensive industries, cautioned that higher buyout prices would inflate compliance costs and ultimately lead to higher consumer tariffs. CERC said it aimed to strike a balance between these competing interests.
The Commission also declined to introduce detailed procedural guidelines for implementing the buyout mechanism, including reporting and verification systems, stating that such matters fall outside its limited mandate under the current framework. Similarly, suggestions on earmarking and governance of funds collected through buyout payments were noted but left to the appropriate authorities. Under existing rules, buyout proceeds are credited to the Central Energy Conservation Fund, with 75 percent transferred to State Energy Conservation Funds for supporting renewable and storage projects.
With this order, CERC has put in place a structured, market-linked pricing framework for RCO buyouts up to 2030. While positioning the buyout option as a transitional compliance tool, the regulator reiterated that its intent is to preserve incentives for direct renewable procurement and REC trading, which remain central to India’s long-term clean energy and decarbonisation goals.
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