The Renewables Obligation (Amendment) Order 2026
This Order amends the Renewables Obligation Order 2015 to change the inflation index used for adjusting the buy-out price and the mutualisation cap for electricity suppliers in England and Wales.
It replaces the Retail Prices Index (RPI) with the Consumer Prices Index (CPI) for all obligation periods starting on or after 1 April 2026.
These changes apply to all licensed electricity suppliers who must either produce Renewables Obligation Certificates (ROCs) or make cash buy-out payments to the Gas and Electricity Markets Authority (Ofgem).
Arguments For
The order states that the change aligns the Renewables Obligation with the standard measure of inflation used across government by switching from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI).
The explanatory note indicates that the new indexing method applies consistently to both the buy-out price and the mutualisation cap starting from the obligation period beginning on 1 April 2026.
The document specifies that the calculation will use the CPI percentage change over the 12-month period ending 31 December of the previous obligation period, providing a defined timeframe for annual adjustments.
Arguments Against
Energy suppliers and generators might note that switching from RPI to CPI typically results in lower annual inflationary increases, potentially affecting the value of Renewables Obligation Certificates (ROCs) or the recovery of shortfalls.
Parties may highlight that the order does not include a full impact assessment, as the government classified the scheme as a notional tax rather than a regulatory provision.
Statutory stakeholders might identify that while the order applies to England and Wales, differences in inflation indexing across different UK nations' renewable schemes could create administrative complexity for suppliers operating across borders.
- -(1) This Order may be cited as the Renewables Obligation (Amendment) Order 2026 and comes into force on the day after the day on which it is made.
(2) This Order extends to England and Wales.
This section establishes the official title of the instrument and sets its commencement date as March 27, 2026.
It limits the legal jurisdiction of the order to England and Wales.
- -(1) The Renewables Obligation Order 2015( 2 ) is amended as follows.
(2) In article 66(1) (interpretation of Part 8), at the appropriate place, insert-
''consumer prices index' means-
- (a) the consumer prices index (for all items) calculated and published by the Office for National Statistics, or
- (b) where the index is not published for a month, any substituted index or figures published by the Office for National Statistics;'.
(3) In article 67(4) (adjustment of the buy-out price for inflation)-
- (a) omit the 'and' after sub-paragraph (a);
- (b) in sub-paragraph (b), for 'for each obligation period thereafter', substitute 'for each subsequent obligation period up to and including the obligation period starting on 1st April 2025';
- (c) after sub-paragraph (b), insert-
', and
- (c) for each obligation period thereafter, the buy-out price for the previous obligation period increased or, as the case may be, decreased by the percentage increase or decrease in the consumer prices index over the 12 month period ending with the 31st December in the previous obligation period (the resulting figure being rounded to the nearest penny, with any half of a penny being rounded upwards).'.
(4) In article 73(5) (adjustment of the mutualisation cap for inflation)-
- (a) omit the 'and' after sub-paragraph (a);
- (b) in sub-paragraph (b), for 'for each obligation period thereafter', substitute 'for each subsequent obligation period up to and including the obligation period starting on 1st April 2025';
- (c) after sub-paragraph (b), insert-
'; and
- (c) for each obligation period thereafter, the mutualisation cap for the previous obligation period increased or, as the case may be, decreased by the percentage increase or decrease in the consumer prices index over the 12 month period ending with the 31st December in the previous obligation period (the resulting figure being rounded to the nearest penny, with any half of a penny being rounded upwards).'.
This section defines the Consumer Prices Index (CPI) and integrates it into the existing 2015 Order.
It mandates that for every obligation period starting after April 1, 2025, both the buy-out price (the fee suppliers pay instead of presenting certificates) and the mutualisation cap (the limit on recovering payment shortfalls) must be adjusted annually based on CPI rather than RPI. The calculation must use the CPI data from the 12-month period ending on December 31 of the preceding year and be rounded to the nearest penny.
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