The Energy Transition | UK government confirms immediate CPI indexation switch for Renewables Obligation and Feed-in-Tariff schemes

This week, we look at the government’s response to the RO and FiT indexation consultation, the National Wealth Fund’s new five‑year £100 billion strategic plan, the phased removal of change of address provisions, and more.

Government confirms immediate CPI indexation switch for Renewables Obligation and Feed-in Tariffs schemes

The government has published its response to two consultations on proposed changes to the annual indexation method used in the Renewables Obligation (RO) and Feed-in Tariff (FiT) schemes. Both indexation consultations were launched in October last year. 

The consultations

The consultations proposed reforms to the indexation method of the RO and FiT schemes in relation to the introduction of the consumer price index (CPI) to replace the prevailing retail price index (RPI).

The government had proposed two options for reform: option one was an immediate switch from the RPI to CPI indexation of the FiT and RO schemes ahead of the March 2026 annual adjustment. Option two would freeze the renewables obligation certificate (ROC) buy-out price and the FiT at the 2025-26 level to be 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. Under option two, there would be no further inflation-linked increases until the CPI-based shadow price matched the RPI-adjusted equivalent, at which point CPI indexation would commence. This "realignment" was anticipated to occur in the mid-2030s and received mixed reception across the industry. 

The government's response

The government has confirmed that it will proceed with option one for both the RO and FiT schemes. Accordingly, indexation will be switched from RPI to CPI ahead of the next annual adjustment on 1 April. The government noted that this was seen as a "proportionate" and "least disruptive" approach, which would balance future energy demand, stability and reduce the financial burden on consumers. This response follows the 2025 Autumn Budget announcement that 75% of the domestic legacy costs of the RO will be publicly funded from 2026-27 to 2028-29.

Government to remove Capacity Market 'change of address' provisions 

The government has published its response to the recent consultation on reforms to the Capacity Market “change of address” (CoA) provisions. The original proposal was to remove the CoA route in order to increase confidence that capacity is delivered in line with the location and configuration set out at prequalification and auction.

The consultation feedback raised concerns about applying the change immediately to existing Capacity Market agreements, including the risk of undermining investor confidence and increasing the likelihood of terminations where projects could no longer relocate to manage delivery risks. In particular, respondents highlighted the impact on projects which had already taken final investment decisions on the basis of the current rules.

Taking account of this feedback, the government has adjusted the implementation approach. The removal of the CoA provisions will now apply only to prequalification in 2026, and to new agreements from 2027 onwards, rather than to existing agreements or those awarded in earlier auctions. This deferred application is intended to allow providers time to factor the change into their investment decisions – and, since National Energy System Operator (NESO) will have issued gate notifications, projects will have a clearer understanding of the likely connection date to inform those decisions. The government states this provides applicants with "as much time as possible to assess their portfolios and ensure they are entering viable projects into future prequalification rounds".

NESO launches transitional Regional Energy Strategic Plan

The National Energy System Operator (NESO), following its decision last April to launch the Regional Energy Strategic Plans (RESPs), has published a "transitional" RESP (tRESP) detailing arrangements for the coordination of distribution network investments for 2028-2033. 

The tRESP report is a stepping stone to the final RESPs (anticipated to be published in 2028) and covers 2028-2033 to match the RIIO (revenue equals incentives plus innovation plus outputs)-ED3  (electricity distribution three) price control period and so align investment and business planning for the distribution network operators (DNOs).

Consultation on tRESP

NESO consulted on the tRESP in the third and fourth quarter of 2025, which comprises three sections.

The nations and regions context provides information on and maps of network infrastructure, transport, industry, generation and more, broken down by region and effectively setting the scene in detail. The section on pathways and consistent planning assumptions includes a "short-term pathway" for each grid supply point area in Great Britain running from 2025-2035, as well as three long-term pathways running from 2035-2050. It notes that these factors in NESO's grid connection reforms and "Gate 2" offer. 

A section on strategic energy need lays out the areas (delineated by grid supply points) requiring increased capacity in gigawatts (GW) and the reasons for the increases, noting this does not impact the relevant DNOs' progress and processes and will not override the grid connection reform. Supporting the tRESP, NESO has also provided ancillary documents, including those on frequently asked questions and hosted a webinar.

Delivery timeframes

It is expected that by the end of 2026, the DNOs will have produced their business plans for RIIO-ED3 and in accordance with the tRESP. 

Once delivered, there will be 11 RESPs. These will sit beneath the umbrella of NESO's Strategic Spatial Energy Plan (SSEP), which is being developed to coordinate system design and optimise planning and efficiencies across the whole of Great Britain's energy sector. In December last year, DESNZ delayed the SSEP's publication – which is anticipated to be in 2027 – to allow for refreshed financial modelling and DESNZ's acknowledgement that this would impact publication of the RESPs.  

UK and Europe sign clean energy security pact 

The UK and EU have signed the Hamburg Declaration, a clean energy pact at the North Sea Summit. The pact aims to facilitate the delivery of 100GW of offshore wind projects in the North Sea to strengthen energy security and reduce both the UK and EU's reliance on fossil fuels, especially in light of current market volatility and geopolitics.

Plans include the development of hybrid assets (wind farms connecting to multiple countries through interconnectors). Following the declaration, National Grid and transmission operator TenneT have announced they will partner to build a multi-purpose interconnector between the UK and Germany: the 2GW GriffinLink project, which is expected to be operational by the late 2030s. 

The declaration comes in the same month as the Department for Energy Security and Net Zero's announcement that offshore wind secured a record-breaking 8.4GW of capacity in the Contract for Difference AR7. 

Ben Wilson, president of National Grid Ventures, said: "Today is a step towards a more integrated energy system in the North Seas….Collaboration on projects like these are key to delivering on more secure, affordable energy for British and European consumers."

National Wealth Fund launches £100bn strategic plan for clean energy

The National Wealth Fund (NWF) has launched a five-year strategic plan intended to mobilise over £100 billion of total finance into capital-intensive infrastructure, supply chains and businesses to support long-term growth and the clean energy transition. 

The strategy identifies 25 priority sectors, with the deepest involvement anticipated in 10 areas where equity, debt and guarantees are expected to have the greatest impact: ports, carbon capture usage and storage, hydrogen, battery manufacturing and electric vehicle supply chains, green steel, power grid, energy storage, nuclear, transport infrastructure and place-based regeneration. Across these sectors, the NWF aims to commit £5.8 billion over the strategy period.

In addition, the strategy targets high-growth and innovative businesses in sectors such as artificial intelligence, semiconductors, quantum technologies, defence, advanced materials, life sciences, critical minerals, aerospace supply chains and sustainable aviation fuels, primarily through debt, guarantees and selective equity. It will also provide debt and guarantees to accelerate "core infrastructure" in water, offshore wind, retrofit, solar, heat networks and electric vehicle charging, supported by a regional project accelerator offer.

NWF notes that the strategy sets out a significant public risk-sharing role in earlier-stage or less mature markets, with the intention of crowding in private investment and supporting regionally significant projects across the UK.

NWF's chief executive, Oliver Holbourn, said: "This is an exciting new chapter for the National Wealth Fund as we look to unlock the UK's future. We will be going further and faster to drive more than £100 billion into the economy, fully deploying our capital over the next five years to help drive economic growth, accelerate the transition to clean energy, transform communities with place-based investments and strengthen our self-sufficiency, security and resilience."

This article was written with the assistance of Oliver Derham, Yasmine Jauffur, trainee solicitors, and Tomisin Agbonifo, paralegal