Indexation Changes for FiT & RO

The UK Government is consulting on changing how inflation indexation is calculated for two legacy renewable support schemes. These are the Renewables Obligation (RO) and Feed-in Tariffs (FiT). The proposal is to move from RPI to CPI, with the change intended to take effect from 1 April 2026.

For RO, the change would apply to the annual indexation of the buy-out price. For FiT, it would apply to the annual tariff adjustment calculation. Indexation would continue. The difference is which inflation measure is used to update values each year.

Why this matters is simple. CPI has generally been lower than RPI over time. If the change is implemented, indexed revenues under RO and FiT would be expected to grow more slowly than under an RPI baseline. The effect on each asset will vary, but the direction of travel is likely to be lower support values over the remaining scheme life than would otherwise have occurred.

For decision makers, the two main impacts are cashflow and confidence. Cashflow forecasts, valuations, and debt covenants that assume RPI linked uplifts may need to be revisited. Confidence matters because investors price not only expected revenues, but also how stable policy settings are for closed schemes. Even a technical index change can increase perceived policy risk if it is viewed as retrospective.

If you are exposed to RO or FiT indexation, the practical next step is to update base case and downside forecasts using CPI, then test headroom on covenants and distribution plans. If you are mid-transaction, be clear on the assumptions you are using and how you are treating implementation timing. If you are not sure whether the proposal affects your asset, start by confirming which scheme you are on and what indexation applies to your revenue stack.