England and Wales will index the Renewables Obligation (RO) to the Consumer Prices Index rather than the Retail Prices Index from the 2026–27 obligation year. The statutory instrument, approved by both Houses and now in force, also switches the RO’s mutualisation cap to CPI and sets annual adjustments using CPI over the 12 months to 31 December of the previous obligation period. Made on 26 March 2026, it took effect on 27 March 2026. (legislation.gov.uk)

The shift reflects long-standing advice from the Office for National Statistics. ONS has said RPI is a poor measure of inflation, typically around one percentage point higher than CPIH because of methodology differences such as the “formula effect”. Moving the RO to CPI brings the scheme into line with statistical best practice. (ons.gov.uk)

Mechanically, the Order ends RPI-based indexation after the 2025–26 RO year and applies CPI-based changes for 2026–27 onwards, using the CPI change in the year to 31 December of the prior obligation period. That replaces Ofgem’s recent practice of using average RPI for the preceding calendar year when setting the buy‑out price. (legislation.gov.uk)

For consumers, ministers expect only modest direct savings from the index switch but it is part of a broader affordability package. Government analysis indicates Option 1 (an immediate CPI switch) could save around £270m a year in policy costs by 2030, while a separate decision moves 75% of the domestic share of RO funding to the Exchequer from 1 April 2026, with suppliers reimbursed and savings passed through to households. Policy costs account for a significant minority of an average electricity bill, so even small percentage changes matter over time. (gov.uk)

Ofgem has illustrated the likely scale of change for 2026–27: using 2025 inflation, the buy‑out price would be £69.81 with RPI versus £69.34 with CPI-a 47p difference per ROC. As a rule of thumb, a one‑percentage‑point wedge on a £67.06 buy‑out price (the 2025–26 level) equates to roughly 67p per ROC-material for suppliers handling millions of certificates, but marginal on an individual bill. (ofgem.gov.uk)

Mutualisation-the backstop that recovers shortfalls if suppliers default-will also index to CPI from 2026–27. For context, the England and Wales mutualisation ceiling for 2024–25 was about £390m, with a threshold of £79m; shifting to CPI means future caps should generally rise more slowly than under RPI, trimming potential exposures at the margin. (ofgem.gov.uk)

Scope matters. This Order applies to England and Wales. The Scottish Government and the Northern Ireland Executive are progressing equivalent changes so the UK‑wide RO framework remains aligned, with Ofgem due to confirm CPI‑indexed 2026–27 values by 1 April 2026. (gov.scot)

What it means for projects backed by ROCs: revenues will still be inflation‑linked, just at the typically lower CPI rate. Stakeholder feedback to government flagged transitional mismatches where some costs-leases, O&M contracts or network charges-remain RPI‑linked; asset owners should review indexation clauses and engage lenders and counterparties to smooth any gaps. (gov.uk)

For households and businesses, no action is needed. Changes flow through supplier obligations and Ofgem’s compliance process. The RO remains closed to new capacity but continues to support legacy generation until the scheme’s final end‑date, with over 30% of UK electricity still supported by RO schemes-another reason to ensure the mechanism is efficient and predictable. (ofgem.gov.uk)

Big picture: aligning the RO with CPI brings it into line with other market mechanisms such as Contracts for Difference and the Capacity Market, reinforcing consistency in clean power financing. It keeps investor signals stable while leaning against unnecessary bill growth-optimism grounded in evidence, not rhetoric. (gov.uk)