The Energy Transition | Government consults on indexation of Renewables Obligation and Feed-in Tariff schemes

This week we look at the government's consultation on the indexation of the Renewables Obligation and Feed-in Tariff schemes, Ofgem's response to a surge in demand-grid connections, the consultation launched on proposed changes to the Capacity Market rules, and more. 

UK government consults on indexation of Renewables Obligation and Feed-in Tariffs

The government has launched two consultations proposing changes to annual indexation of the Renewables Obligation (RO) and Feed-in Tariff (FiT) schemes. The proposed changes would move the indexation of payments made under both schemes away from the retail price index (RPI) in favour of the consumer price index (CPI), and in a move which has had a mixed reception across the industry, potentially backdating these changes to 2002. 

The RO and FiT schemes

The RO scheme was introduced in 2002 to incentivise renewable generation by issuing certificates for each MWh of electricity produced from renewable sources, which are then purchased by electricity alongside the electricity to which they relate. Where suppliers do not purchase sufficient renewable obligation certificates (ROCs), they must pay a buy-out price to Ofgem which is set by the government each year. Although the scheme closed to new entrants since 31 March 2017, it still supports over 30% of the UK's current electricity generation. The buy-out price of ROCs was designed to be adjusted annually to ensure that the value of the financial support kept pace with overall UK inflation.

The FiT scheme ran between the April of 2010 and of 2019, supporting renewables facilities with capacities up to 5MW. It continues to support 850,000 individual electricity generators. The FiT scheme was designed such that both generation and export tariff levels are adjusted annually with inflation to maintain investor confidence, ensure the long-term viability of the projects and avoid erosion in the nominal value of subsidy over time. 

Rationale for reform

When the schemes were introduced, RPI was the most widely used measure for general inflation, but it is now generally accepted that RPI has tended to overestimate annual growth compared to CPI. The shift in indexation under these schemes was expected, as HM Treasury has pledged full replacement of RPI with CPI by February 2030, but under the two proposals being consulted on, that change will be greatly accelerated.

The government has stated that the aim of this reform is to reduce the cost of subsidies to consumers, savings which the government estimates could be between £320 million and £1 billion and £50 million by 2031/2032.     

Proposed options 

The consultations have proposed two options for reform, with option one entailing an immediate switch from RPI to CPI indexation ahead of the March 2026 annual adjustment.

Option two would freeze the amount of the ROC buy-out price and the FiT at the 2025/26 level set in April 2026. The government would construct a "shadow" price for each ROC buy-out price and FiT comprising the 2002 price annually adjusted using CPI, instead of RPI. There would be no further inflation-linked increases to the ROC buy-out price or the FiT until this CPI-based shadow price matches the current RPI-adjusted equivalent, at which point indexation would resume, using CPI. In respect of FiT assets, the government estimates the point of "realignment" would occur in the mid-2030s.

The RO consultation closes at 5pm on 28 November with the FiT consultation closing at 5pm on 12 December. 

If you would like to discuss the potential impact of the proposed reforms, please reach out to one of our experts. 

Ofgem responds to the surge in demand grid connections 

Ofgem has responded to the recent surge in demand-project grid connection applications, stating it is increasingly focusing on demand-connection reform to address the backlog.

There has been a substantial increase in demand-grid connections, with an increase from 41 gigawatt (GW) in November 2024 to 125 GW in June 2025. Ofgem's response highlights that the saturation of the queue poses a serious risk that the connection of strategically important demand projects to the grid will be unduly delayed.

Currently, the National Energy System Operator (NESO) is undergoing its grid-connections reform process, known as TMO4+, which manages the connection queue by prioritising generation and storage projects that are ready to connect and (in the case of distribution connected projects) strategically aligned under the Clean Power 2030 Action Plan. This queue management system does not, however, apply to demand connections, which has unintentionally resulted in excessive growth in the demand queue. Ofgem has recognised that this has included a number of "speculative" projects which may be blocking the progress of important projects.

To resolve this, Ofgem is changing its focus to reforming the demand connection process. It has pledged to take a number of actions.  It will review queue management options and implement a viable queue to enable demand projects to progress to connection. It will also look to enable faster connections through regulatory reform and prioritise strategically important demand connections.

Ofgem also states it expects NESO to "bring forward amendments to its connection methodologies and guidance" to ensure strategically important projects are able to benefit from prioritisation where appropriate.

Ofgem is welcoming suggestions from interested parties for how to improve the demand connections process, which should be sent to connections@ofgem.gov.uk by 5 December. 

Consultation on proposal to disallow location changes under Capacity Market rules

The government has launched a consultation on its "minded-to proposal" to change the Capacity Market (CM) rules. Under the current CM rules, developers are entitled to notify a change of address for a pre-qualified capacity market unit (CMU) after the auction in which it was successful; for example, in scenarios where the original CMU experiences delays or development hurdles. The proposals would remove this right from any newbuild or demand-side response CMUs. The effect would be that any pre-qualified CMUs would have to remain at the address and site which was stated in the prequalification application.

If the proposed changes are approved, the consultation document states that the amended CM rules would apply to all current and future CM agreements from the date on which the changes come into force.

The government states that the rationale behind the change is to ensure that any project that enters the CM prequalification stage is "genuinely deliverable" at the stated site. The consultation document suggests that the current CM rules around change of site do not allow the same rigour to be applied to the review of an updated site as they would have received under the prequalification stages. The government therefore feels that the CM rules "introduce a risk that the CMU ultimately delivered is no longer the same project that secured the agreement", which it views as weakening delivery assurance and not sufficiently disincentivising applicants from seeking to prequalify projects that are not feasible at the point of prequalification. 

The proposal also states that the government has already ruled out an alternative approach of limiting (rather than precluding) address changes.

The government has designated this consultation as an urgent change, the consultation will run only until 11.59 pm on 14 November. To submit responses, applicants should complete the online form. A government response to the proposal is expected in winter of 2026.

NESO consults on holistic network design for offshore wind 

The National Energy System Operator (NESO) has launched a public consultation on its Holistic Network Design (HND) Implementation Plan, which is a blueprint for the expansion of offshore wind capacity and connection to the grid. This plan is integral to the UK's strategy to triple offshore wind capacity to up to 50 gigawatts (GW) by 2030, under its Clean Power Action Plan.

NESO’s HND Implementation Plan outlines 57 cable routes linking 37 offshore wind farms to the onshore grid. The plan builds on NESO’s earlier HND work and follow-up exercise. It includes projects from ScotWind, Celtic Sea floating wind, and Innovation and Target Oil and Gas leasing rounds. The plan excludes onshore upgrades but focuses on coordinated offshore cable connections to optimise infrastructure and environmental outcomes. 

Alongside the HND plan, NESO has also published three strategic energy planning environmental Assessments, which include a strategic environmental assessment, a habitats regulations assessment and a marine conservation zone assessment. These are focused on environmental factors such as geology, biodiversity and marine flora and fauna to ensure that grid infrastructure expansion minimises ecological disruption.

While NESO provides the strategic planning and environmental blueprint, individual windfarm project owners will be required to finalise cable routes and secure development consents and licenses. The owners will need to carry out further detailed environmental evaluations compliant with regulatory requirements before proceeding to construction.

NESO's director of strategic energy planning and chief engineer, Julian Leslie, said: "expanding offshore wind is critical to achieving clean power, but we’re clear that the expansion of the transmission network infrastructure must consider the natural environment."

The consultation period is open until  30 January 2026, and stakeholders are invited to send their input using this form: Public Consultation: Holistic Network Design Implementation Plan.

Competition for funding launched to increase EV charging capacity on the strategic road network 

Innovate UK, part of UK Research and Innovation, has pledged up to £10 million in grant funding from the Office for Zero Emission Vehicles to successful applicants in a competition designed to develop and demonstrate solutions to increase public electrical vehicle (EV) charging provision for longer journeys on the strategic road network (SRN). 

To be eligible, projects must satisfy the following criteria: 

• A funding request between £500,000 and £3 million.
• Be able to start funded activities by 1 July 2026.
• Represent a novel solution to power, grid and operational constraints to public EV charging provision faced at all purpose trunk road (APTR) cold spots and motorway service areas (MSAs) along the SRN in England.
• By 31 March 2028, conclude the funded portion of development and deployment.
• From 31 March 2028, operate and maintain the project safely (adequate customer support must be provided at the developer's cost).
• Be demonstrated at one or more MSA sites, or one or more sites within one mile of the SRN, so as to reduce or eliminate an APTR cold spot. 

The competition closes on Wednesday 25 March 2026 at 11:00am GMT. Further information on the background context, requirements and application process of the competition can be found here.

This article was written with the assistance of Adam Budd, Ollie Derham, and Yasmine Jauffur, trainee solicitors, and Tomisin Agbonifo, paralegal.