Putting a Price on Renewable Accountability: CERC’s Proposal on Buyout Price

CERC’s draft proposal on the Renewable Consumption Obligation introduces India’s first Buyout Price for unmet green energy use, a small rule that could reshape how responsibility is valued, shared, and communicated.

• By Mayuri Singh & Nishant Saxena

When Rules Meet Responsibility

On 22 October 2025, the Central Electricity Regulatory Commission (CERC) released a draft suo motu order (Petition No. 12/SM/2025), introducing a Buyout Price as an alternate compliance mechanism under the Renewable Consumption Obligation (RCO).

This stems from the Ministry of Power’s notification dated 27 September 2025, mandating that distribution licensees, open access consumers, and captive users must source a minimum share of electricity from renewable energy.

The draft defines three routes to compliance:

1. Direct consumption of renewable power, physically or via storage;
2. Purchase or self-generation of Renewable Energy Certificates (RECs), including Virtual PPAs;
3. Payment of a Buyout Price, a monetary alternative for unmet obligations.

For FY 2024–25, CERC proposes ₹245/MWh for the Buyout Price, roughly 5% above the previous year’s weighted average REC price of ₹232.84/MWh. Going forward, the Buyout Price would be pegged at 105% of the weighted average REC price for each preceding year, published annually by NLDC.

Stakeholders have until 21 November 2025 to submit comments. Beyond the mechanics, this is an opportunity to reflect on what the price of accountability truly is.

Placing the Rule in Policy Context

India’s renewable energy growth has been largely supply-driven through generation-linked tenders, concessional financing, and ambitious capacity targets. The RCO + Buyout framework shifts attention to the demand side, ensuring that consumption patterns, not just installed capacity, align with national clean energy goals.

By embedding renewable use within the compliance obligations of designated consumers, the framework expands accountability. It acknowledges practical constraints like grid readiness, intermittency, or short-term REC unavailability, while setting a floor for responsibility.

At first glance, a Buyout Price might seem like a soft escape hatch. But in policy design, it signals something more subtle: an explicit price for inaction. The 5% premium over the REC average is not just arithmetic; it is a behavioral nudge, clearly signaling that the Buyout is meant as a last resort.

Following the Money, and the Message

Funds collected under this mechanism will flow into the Central Energy Conservation Fund, with 75% earmarked for respective State Energy Conservation Funds.

Yet ambiguity remains. How will states operationalize these funds? Will they catalyse renewable capacity, or risk becoming another underutilized “green account”? This matters because every regulatory rule communicates. The clarity of fund utilisation is more than a compliance issue; it’s a trust and credibility challenge.

From a strategic communications standpoint:

• If stakeholders understand the why behind the Buyout, they align with the intent.
• If the mechanism is poorly explained, it risks being perceived as a revenue tool rather than a policy lever.
• For investors and ESG observers, clear communication signals a transparent, credible regulatory ecosystem.

In short, paying ₹245/MWh is more than just compliance; it’s a public acknowledgment of the friction between intent and execution in India’s renewable transition.

Gaps and Risks Worth Attention

While the draft is conceptually sound, several grey areas merit scrutiny:

1. Ambiguity in Fund Utilisation: The draft mandates 75% of proceeds flow to state funds but provides no clarity on tangible deployment. Without this, the Buyout risks being merely transactional.
2. Temporal Uncertainty: Annual pegging to REC averages introduces price volatility. Multi-year procurement strategies may face unpredictability unless an indexing mechanism or price corridor is clarified.
3. Moral Hazard Risk: If the Buyout is perceived as a predictable cap on compliance costs, it could dull incentives to procure renewable energy, particularly for open access consumers and captive plants.

Strategic communications can mitigate these risks. By framing the Buyout as a measure of responsibility, not a loophole, policymakers, regulators, and companies can signal commitment rather than mere compliance.

The Real Significance of the Buyout Price

CERC’s design strikes a balance between market gaps and behavioral economics:

• Option 1 (direct consumption) and Option 2 (REC purchase) directly expand renewable capacity.
• Option 3 (Buyout) is a temporary cushion when supply or infrastructure falls short.

This approach quietly quantifies accountability. It conveys that rules are not just about penalties, but also about shared responsibility and public acknowledgment of gaps.

In this sense, the Buyout Price is as much a communication tool as it is an economic instrument. How it is explained by regulators, utilities, industries, and state agencies will determine whether it builds credibility or confusion.

Next Steps and Sector Outlook

By formalising a structured buyout mechanism, CERC is closing a long-standing loop in India’s renewable compliance ecosystem.

Yet, the proposal will only work if stakeholders engage constructively within the comment window, shaping clarity before it becomes law. If this mechanism evolves transparently, linking the proceeds of buyouts to tangible capacity creation, it could become an elegant model for balancing ambition with realism.

But if it’s misunderstood or poorly communicated, it risks being seen as another bureaucratic checkbox.

Parting Thoughts

In India’s clean energy story, rules communicate before results do. The CERC Buyout Price is modest in scope but rich in implication, a small number with outsized signaling power.

It is a reminder that transparency, accountability, and comprehension are as critical to the energy transition as gigawatts and grids.

Ultimately, this draft order tests more than fiscal discipline; it tests narrative discipline. Because India’s energy transition, like all transformations, depends not just on what’s built, but on how it’s communicated, trusted, and believed.

Also read: Bridging Risk and Reality: The Missing Communications Link in Clean Energy Finance