Following the consultation launched in October 2025, the Department for Energy Security and Net Zero (DESNZ) has now issued its final decision regarding indexation for the Renewables Obligation (RO) and Feed-in Tariff (FiT) schemes.
The government has selected Option 1, confirming an immediate switch from the Retail Price Index (RPI) to the Consumer Price Index (CPI) for annual payment adjustments, effective from 1 April 2026.
This option was deemed to be far less damaging to generators than Option 2, where a temporary freeze of ROC and FiT Asset indexation until 2034 was proposed. This option would have reduced the UK’s largest renewable fund - UK Wind, Schroders Greencoat - by 7.5%, in comparison to a reduction of 1.7% from the decision to move from RPI to CPI indexation.
While the industry breathes a collective sigh of relief that the more punitive "Option 2" (a temporary freeze on indexation) was rejected, the move to CPI still represents a retrospective change to over half of the UK’s renewable project capacity.
The government’s rationale is clear: RPI has consistently tracked higher than expected - hovering around 5.5% compared to the anticipated 2.5–3% - which DESNZ argues has "overcompensated" generators at the consumer's expense.
Even with RPI indexation, wholesale capture prices have consistently fallen below the investment assumptions set out in the 2013–2017 banding review.
When the practical implications are examined, the upsides are marginal at best;
The wider impact of this decision isn't just shown on existing balance sheets, but also on tomorrow’s infrastructure. Retrospectively changing the terms of active subsidy contracts sends a jittery signal to the global investment community.
Stability is the currency of infrastructure investment. By altering legacy schemes, the government risks increasing the cost of capital for future projects, including those bidding into future Contracts for Difference (CfD) rounds. If investors perceive UK regulation as a risky bet, this will ultimately be priced in and undo any saving incurred as a result of the change.
While this does appear to be a one-off change, this does potentially open up for future revenue reductions of other existing subsidy support mechanisms. With policy decisions largely out of control, take advantage of the revenue streams you can control - specifically your Power Purchase Agreement (PPA).
As government-backed revenues face real-term erosion, maximising the value of your exported power is the most effective lever available to recoup lost value. Accepting an unquestioned renewal from an incumbent supplier is a luxury generators can no longer afford.
How We Help You Adapt Our PPA pricing engine is built for this exact environment, helping you offset regulatory squeezes by capturing market upside:
Register here or email us at contact@renewable.exchange for a consultation on mitigating the impact of the CPI switch.
