Indexation change ‘an unhelpful signal’ for renewables investment

Solar Energy UK

28 January 2026

The Government’s decision today to change how inflation is reflected in legacy subsidy payments has met with disappointment from the solar industry.[1,2]

Last year, the Department for Energy Security and Net Zero (DESNZ) consulted on moving Feed-in Tariffs (FiTs) and the Renewables Obligation (RO) from retail prices index to the consumer prices index, which is typically about one percentage point lower. FiTs were introduced in April 2010 and were closed in 2019, whereas the RO began in 2002 and ended over 2015-2017.

Together, FiTs and the RO provided a much-needed stimulus to help ween the UK off its historic reliance on expensive and polluting natural gas and coal, sourced from abroad. In 2009, renewables accounted for less than 2% of the UK’s electricity, which rose to 31% nine years later. The figure was over 44% last year.

The Government’s motivation for the change was to cut the schemes’ ongoing impact on consumer electricity bills. However, as our response to the consultation on the RO said, “We would respectfully emphasise that long-term affordability is best achieved through a stable and predictable regulatory framework that enables new generation to be delivered at the lowest possible cost. Investor confidence in policy stability is fundamental to keeping financing costs down, which ultimately delivers better value for consumers.”

Chris Hewett, Chief Executive of Solar Energy UK, said: “Further investment in renewable energy – our cheapest source of power – is of paramount importance for providing lower and more stable bills for us all, while also driving economic growth, jobs, energy security and decarbonisation. We are concerned that changing indexation will weaken investor confidence and raise the cost of capital just when the sector is planning for unprecedented expansion. Ultimately, this risks undermining DESNZ’s objective to lower bills.”

The government’s own response to the RO consultation notes its impact, which saw the six largest UK-listed renewable energy funds fall in value by about £400m. “Several shared the view that this drop in valuations alone is evidence that the proposals will have a damaging effect on investor confidence in the long-term,” it noted.

Furthermore, the decision runs counter to what the Government said in a previous consultation on RPI reform for both schemes, from 2020. It indicated that any changes would not apply until 2030.

As stated in our responses to the two consultations, this established reasonable expectations among generators supported by FiTs and the RO. “Altering the indexation basis retrospectively and at relatively short notice risks undermining investor confidence and sends an unhelpful signal to the market,” we told DESNZ. Doing so “fundamentally undermines trust in government commitments,” we added.

Solar Energy UK is also frustrated by the inadequate period of consultation that was provided for such a significant change in policy. Our request for an extension was disregarded, leaving insufficient time for detailed financial analysis across a diverse range of assets, debt structures and contractual arrangements.

[1] Renewables Obligation (RO) scheme: indexation changes – DESNZ

[2] Feed-in Tariffs (FiT) scheme: indexation changes – DESNZ

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Editor’s notes

For more information or to request an interview, please contact:

Gareth Simkins, Senior Communications Adviser

gsimkins@solarenergyuk.org

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