Global Enterprises in India: Aligning Strategy with the New RCO Framework and Existing RPO Landscape

As multinational companies scale operations in India amid climate-tech and sustainability commitments, the evolving regulatory framework around renewable energy adoption demands their attention. Two critical mechanisms now shape corporate energy-strategy in India: the newer Renewable Consumption Obligation (RCO) regime and the longstanding Renewable Purchase Obligation (RPO). In this article we parse both frameworks, highlight how global players need to respond, and offer strategic steps to integrate compliance into broader ESG-driven business operations.

The regulatory landscape: RPO first, now RCO

Historically, India’s renewable energy regulation for obligated entities such as distribution licensees, open-access consumers and captive power producers hinged on the RPO mechanism. Under the Electricity Act, 2003 (via state regulatory commissions and – in some cases – national policy), companies had to ensure a fixed percentage of electricity consumption was procured from renewable sources. 

However, more recently, the Central Government under the Energy Conservation Act, 2001 (as amended) introduced RCO. This mechanism shifts the focus from merely procuring renewable electricity to actual consumption of renewable energy (electrical or other non-fossil feedstocks) by designated consumers. 

From FY 2024-25 onward the RCO regime sets upward trajectories for consumption of renewables by designated consumers. Meanwhile, the RPO regime continues in parallel (in many states) under the Electricity Act frameworks, meaning companies may face dual obligations. 

Why this matters for multinational companies

For large global players operating manufacturing, data centres, captive power or open-access arrangements in India, these developments have implications on multiple fronts:

• Energy sourcing strategy: Under the RCO regime, it is no longer sufficient to simply purchase renewable electricity in the statutory percentage. Companies must consider direct consumption of renewables, deployment of on-site generation, virtual power purchase agreements (VPPAs) and energy-storage systems, in order to demonstrate actual renewable energy use. This is a more demanding standard than earlier RPO compliance.

• Regulatory risk: Non-compliance with the RCO can trigger penalty provisions under Section 26 of the Energy Conservation Act. Given the greater regulatory clarity and stricter enforcement, global firms cannot treat India’s renewables obligation as a purely voluntary or reputational exercise.

• Financial modelling & cost of power: Integrating renewables, especially through on-site generation, storage, or long-term PPAs, carries cost and operational implications. The RPO regime already required companies to factor in renewable energy costs when state commissions set tariffs. Under RCO the cost calculus expands: companies may face buy-out options (i.e., paying a fixed charge instead of meeting the target) but that may not align with long-term ESG strategy.

• Reporting and audit requirements: The new framework under RCO imposes annual certification, audit of consumption data and reporting deadlines by the Bureau of Energy Efficiency. For multinationals with global ESG reporting, India’s obligations must be integrated into internal control, compliance and audit workflows.

• Risk of double-counting / overlap: Because both RPO and RCO may apply simultaneously, companies must avoid assuming that one obligation satisfies the other. While the frameworks share similar purposes, their legal basis, scope and target audiences differ. 

Key details of each regime

RPO (Renewable Purchase Obligation)

• Under the Electricity Act-derived regime, obligated entities must purchase a minimum percentage of their electricity from renewable energy sources.

• Includes use of Renewable Energy Certificates (RECs) to meet obligations when direct consumption is difficult.

• Implementation in many states has been patchy; some obligated entities have repeatedly missed targets.

• Technology-specific targets (eg solar, wind, hydro) may apply, and state-level variation is the norm.

RCO (Renewable Consumption Obligation)

• Governed under the Energy Conservation Act, particularly after the amendment of 2022.

• Applicable to “designated consumers” (which include distribution licensees, open access consumers, captive users) based on their energy consumption profile.

• Targets begin at ~29.91% of total electrical energy consumption in FY 2024-25, rising to ~43.33% by FY 2029-30.

• Compliance options include direct use of renewables, energy storage supported renewables, purchase of RECs including via virtual PPAs, or paying a buy-out price when fulfilment is infeasible.

• Failure to comply triggers defined penalties and risk of public enforcement. 

Strategic steps for global organisations

Given the above, multinational companies in India should consider the following roadmap:

1. Mapping current energy profile & obligations
   – Determine whether your operations fall under “designated consumer” as per RCO or obligated entity under RPO (or both).
   – Quantify current energy usage (total electrical energy, any on-site generation, open-access arrangements).
   – Identify prior renewable procurement practices (PPAs, RECs) and gaps relative to target years.

2. Gap-analysis against future trajectory
   – For RCO, calculate required percentage targets year-on-year until 2029-30 and gauge your shortfall.
   – For RPO, review state-level obligations, compliance history, and enforceability in your state(s) of operation.
   – Model cost implications: renewable PPA costs, potential buy-out payments, on-site renewable+storage CAPEX/OPEX.

3. Design a compliance-friendly energy procurement strategy
   – Consider on-site generation (solar, wind, etc) to capture direct consumption of renewables rather than only purchase.
   – Engage in open-access or captive renewable projects where permissible.
   – Explore virtual PPAs as a way to secure renewables while meeting consumption-based obligations.
   – Leverage energy-storage systems (especially if reach/dispatch of renewables is intermittent).
   – Where compliance is challenging, budget for buy-out or certificate-purchase options but treat them as fallback not primary.

4. Integrate into ESG and governance framework
   – Ensure internal reporting tracks both renewable procurement and consumption (not just purchase).
   – Align the Indian compliance obligations with your global ESG disclosures (e.g., CDP, TCFD, sustainability reports).
   – Conduct annual audit of renewable consumption as required under the RCO regime, and maintain certification records.
   – Build governance (energy-committee oversight, board-level review) into energy transition efforts.

5. Engage proactively with regulators and state-level bodies
   – Monitor state regulatory commission orders for RPOs – some states may adjust targets, definitions or compliance mechanisms.
   – Until states fully align their RPO targets with the national RCO trajectory, maintain clarity on which obligations apply where.
   – Collaborate (or remain in dialogue) with industry associations or regulatory forums to influence transition issues such as grid-access, REC market liquidity, or storage integration.

6. Manage risk and embed flexibility
   – Energy markets and grid conditions are evolving; lock in renewable PPAs with flexible terms.
   – Consider scenario modelling (e.g., delayed grid integration, higher CAPEX for storage) to ensure cost-resilience.
   – Avoid double-counting: having bought a renewable certificate may help RPO, but may not equate to the consumption-based standard under RCO.
   – Prepare for enforcement: states are more actively auditing compliance under RCO; non-compliance can affect licence conditions, public disclosures and financial penalties.

Practical use-case: Manufacturing facility in India

Consider a multinational manufacturing firm with multiple captive power assets in India and an open-access arrangement. Under the old regime, it met its RPO by purchasing RECs and entering one solar PPA. Now, under RCO:

• It must ensure a growing share of its total electrical energy consumption is covered by renewables (e.g., 29.91% in FY 2024-25 rising to 43.33% by FY 2029-30) as per the central notification.

• It must measure consumption accurately (including captive generation, open-access draws, consumption by manufacturing process) and ensure audited certification by a BEE-approved auditor.

• Options: deploy larger roof-top or ground-mounted solar at the facility, integrate battery storage to ensure dispatchable renewables, consider long-term off-site VPPA, or if none feasible, budget for buy-out.

• Will also review its RPO obligations from its state operational footprint (which may still be active) and align both strategies to avoid regulatory friction.

By doing so the company not only meets regulatory compliance but also strengthens its global-ESG credentials (which in turn supports investor, customer and board oversight). Energy cost benefits and risk mitigation become embedded rather than an after-thought.

The road ahead: What multinationals should watch

• As state-level regulatory commissions recalibrate their frameworks, the difference between RPO and RCO may blur, but for now the two regimes run in parallel and require distinct treatment.

• The REC market and virtual PPA landscape will continue to evolve; these instruments can support compliance but should not be the sole strategy.

• Technology and grid-integration of storage will become a key enabler in meeting consumption-based obligations, especially for large users operating across India’s grid constraints.

• Given global supply-chain moves, companies headquartered outside India must ensure their Indian operations align with the global corporate decarbonisation strategy (not only for regulatory compliance but reputational risk).

• Monitoring deadlines, audit protocols, state-wise variance and the potential for enforcement actions will become increasingly important as India scales up its non-fossil fuel ambitions.

Conclusion

For multinational companies operating in India, the regulatory shift from procurement-based obligations (under RPO) to consumption-based obligations (under RCO) marks a meaningful turning point. The phrase “rco compliance” will increasingly become part of the board-level agenda in India, alongside the more familiar rpo renewable energy metrics.

Embedding a comprehensive strategy now – one that maps obligations, aligns procurement and consumption of renewables, integrates audit and governance, and builds flexibility into energy sourcing – will not only satisfy regulators but position companies to lead in the fast-evolving energy transition. If properly handled, the regulation becomes a strategic enabler rather than a mere checkbox.

As India marches toward its 2030 targets, global firms must stay ahead of the curve: treat compliance not as a cost but as a strategic investment in resilience, future-proofing and competitive differentiation.