UK: Government to proceed with switch from RPI to CPI indexation for existing renewable subsidy schemes

On 28 January 2026, the Department for Energy Security and Net Zero (“DESNZ”) has published its response to its earlier consultations on proposed changes to the inflation indexation for the Renewables Obligation (“RO”) and Feed-in Tariffs (“FiT”) subsidy schemes. In its consultation, DESNZ put forward proposals to move these regimes from RPI-indexation, to CPI. This also reflected the UK government’s general policy to phase out RPI by 2030. 

The original consultations put forward two options for the move to CPI-based indexation:

• an immediate switch to CPI indexation, which would take effect in April 2026 when the next annual adjustment to the RO buy-out price and FiT scheme costs takes place (“Option 1”);
• a temporary freeze of the RO buy-out price and FiTs at the 2025/26 level, with a ‘shadow’ price schedule reflecting CPI indexation from 2002, and no indexation-linked increases being made until the CPI-based shadow price matches the RPI-adjusted price (“Option 2”).

In its response, DESNZ has confirmed that, notwithstanding almost half of respondents stating a preference for neither option to be taken forward, it will proceed with Option 1. DESNZ also noted that the majority of respondents disagreed that the use of CPI would be more accurate or fair. For RO projects, the change will apply to the indexation of the RO buy-out price ahead of the next annual adjustment in April 2026; and for FiT projects, the change will apply to the indexation of FiT rates ahead of the next annual adjustment on 1 April 2026. 

Many respondents have raised concerns as to the impact of the indexation change on investor confidence and appetite to invest in UK renewables, as well as the financial impact and increased cost of capital. Some responses also indicated that the benefit to consumers would be minimal, as any savings resulting from the indexation change would be undermined by difficulties in refinancing existing projects, as well as the potential for the availability of investment for future market transactions being reduced. In announcing its decision, DESNZ considers that the savings for consumers could be in the order of £270 million per year at its peak in 2030, which combined with a wider package of measures, would reduce the burden on consumers. 

DESNZ also believes that Option 1 reduces additional uncertainty for legacy assets, while delivering a clear message affirming the UK's commitment to a stable and transparent regulatory environment.

What’s next?

Implementation of the changes

In respect of the change to the RO, the UK and devolved governments will have to make affirmative statutory instruments to implement the change prior to 1 April 2026. For the FiT regime, a draft negative statutory instrument has already been laid in Parliament to delay the publication deadline for FiT rates from 1 February 2026 to 1 April 2026 (the publication deadline will revert to 1 February for future years). Modifications to licence conditions will be made before 1 April 2026 to implement the indexation change for FiTs.

A significant proportion of responses suggested that either option put forward by DESNZ could represent a breach of legitimate expectation based on the government’s prior commitments. With 1 April 2026 on the horizon, generators with RO- or FiT-incentivised projects do not have long to address any potential concerns arising from today’s announcement, including in relation to PPA agreements. If you would like to discuss the impact of the decision on your projects, as well as exploring options available to you, please get in touch with a member of our team.