Solar Energy UK
26 November 2025
The Treasury will be shouldering the bulk of the costs of starting the UK’s successful transition away from a power system dependent on pricey natural gas, the Chancellor announced today. The measure will have a marked impact on household bills.
From April, the government will cover three quarters of the costs of the Renewables Obligation (RO), for domestic bills. This will continue for three years, at a cost of £2.3bn per year.
The scheme was designed to encourage generation from wind, solar and other renewable sources, entering into effect in 2002 in Great Britain and three years later in Northern Ireland. It requires electricity suppliers to present a certain number of Renewables Obligation Certificates (ROCs) for each megawatt hour used by customers. This can be done either through generating their own renewable energy, purchasing certificates from other suppliers, or contributing to a buy-out fund.
The RO was closed to new entrants in 2017. The final entrants will continue to be participate until the scheme’s definitive closure in 2037. It was replaced by Contracts for Difference, which provides investor confidence at lower cost to the Treasury.
“One of the greatest drivers of the rising cost of living is the cost of energy bills. The cause of high energy bills must be tackled at source. And so we are investing in energy security, in nuclear and renewable energy and in insulation, through our warm homes plan. But that’s not enough, when people are struggling with energy bills today,” said Chancellor Rachel Reeves.
For the average domestic annual bill of £963 per year, around £102 currently goes towards RO payments.
“Reform of the Renewables Obligation is both a welcome and expected move by the Chancellor. Together with the rising proportion of power coming from cheap solar and other renewable sources, plus reform to the electricity markets, we can expect bills to fall further in the coming years,” said Chris Hewett, Chief Executive of the trade association Solar Energy UK.
Separately, the Government has extended a consultation on reforming how payments under the RO and the old Feed-in Tariffs regime – closed to new entrants in April 2019 – respond to inflation. Solar Energy UK is considering its position on the matter.[1]
For families, the Chancellor said that all the measures in her budget would cut annual electricity bills by around £150.
Part of the reduction will come from the end of the Energy Company Obligation, which requires energy suppliers to pay for insulation and other upgrades for homes in fuel poverty, will be abolished. It imposed extra costs while delivering little, she argued.
“The ECO scheme clearly has flaws, such as the lack of certification for energy upgrades. What follows, under the Warm Homes Plan, should learn from how the standards body MCS has driven high-quality solar and battery storage installations for homes. We look forward to its swift delivery,” said Hewett.
“Turning to training, making apprenticeships for under 25s completely free is most welcome. The solar sector is expanding fast but we need to train as many people as we can to meet our potential to supply cheap, green and secure power,” he added.
[1] Renewables Obligation (RO) scheme: indexation changes
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