A statutory instrument amending the Renewables Obligation Order 2015 switches inflation indexation for the buy-out price and the mutualisation cap from the retail prices index (RPI) to the consumer prices index (CPI) for obligation years starting on 1 April 2026. (legislation.gov.uk)
From the obligation period after the one beginning on 1 April 2025, the buy-out price is uplifted or reduced by the percentage change in all‑items CPI over the 12 months to 31 December in the previous obligation period, rounded to the nearest penny with any half‑penny rounded up. The same rule is applied to the mutualisation cap. (legislation.gov.uk)
The Order adds an explicit definition of CPI as the all‑items consumer prices index calculated and published by the Office for National Statistics, or any substituted index or figures published by the ONS where a month is not available. This provides a clear statutory anchor for future calculations. (legislation.gov.uk)
Scheme mechanics are unchanged. Ofgem continues to administer the Renewables Obligation (RO), issuing Renewables Obligation Certificates (ROCs) to accredited generators. Suppliers must either present ROCs for each megawatt hour supplied or make a cash payment at the buy‑out price; mutualisation remains in place to recover qualifying shortfalls, subject to a cap. Historically, both the buy‑out price and the cap were indexed to RPI. (legislation.gov.uk)
Government confirmed the policy decision to adopt CPI following a joint consultation, citing consistency with other energy schemes such as Contracts for Difference and the Capacity Market, and alignment with the UK’s standard inflation measure. The consultation outcome set out that CPI indexation would apply from the 2026/27 compliance year. (gov.uk)
Transitional arrangements are straightforward. RPI‑indexed values continue to apply up to 31 March 2026, with the 2025/26 buy‑out price remaining £67.06 per ROC until that date. Ofgem has stated it will publish the CPI‑indexed buy‑out price and mutualisation levels for 2026/27 by 1 April 2026. (ofgem.gov.uk)
The instrument extends to England and Wales. Parallel action is being taken in Scotland and Northern Ireland to maintain UK‑wide alignment of RO indexation from April 2026, with the Scottish Government advancing its own amendment order and the Northern Ireland Executive consulting on equivalent changes. (legislation.gov.uk)
For compliance teams, the operative change is the index source and timing. Annual adjustments will now use out‑turn CPI over the calendar year to 31 December within the preceding obligation period. Once Ofgem publishes the 2026/27 figures, suppliers can update RO pass‑through and settlement calculations accordingly. (legislation.gov.uk)
Parliamentary scrutiny followed the affirmative procedure. The Order was laid on 2 February 2026, considered by a Delegated Legislation Committee on 11 March 2026, and not drawn to the special attention of the Houses by the Joint Committee on Statutory Instruments. Enabling powers are provided by sections 32, 32G and 32K of the Electricity Act 1989. (statutoryinstruments.parliament.uk)
No full impact assessment accompanies the instrument. The Explanatory Note records that the RO is classified by the Office for National Statistics as a notional or imputed tax and, accordingly, the change is not treated as a regulatory provision for impact assessment purposes. (legislation.gov.uk)