Impact of RPI switching to CPI from April 2026 for renewable energy companies
The government has announced that the Retail Price Index (RPI) indexation will be replaced with the Consumer Price Index (CPI) for Renewables Obligation (RO) and Feed in Tariff (FiT) subsidies from April 2026.
As CPI is usually lower than RPI, businesses will see a decrease in their annual uplifts and long term income from renewable assets. They should consider the impact of this on revenue projections and plans for investment.
What do business owners need to know?
Owners of renewables assets should look out for the following changes:
- Lower revenues: the switch to CPI is likely to mean smaller annual increases in subsidy payments.
- Lower asset value: the decrease in subsidy payments and subsequent long-term revenues is likely to lower a business’s net present value.
- Adjustments to borrowing terms: lenders may reassess risk and make adjustments which affect the cost of borrowing.
The switch will not be phased in – it will become effective from 1 April 2026. Business owners, particularly those relying on RO or FiT payments for cash flow, should review their financial models, forecasts and payback periods. They should also look at their plans for future investment and sale, as this change has the potential to reduce investor appetite.
What has the impact been on the share price of investment funds?
We assessed the trends in share price of the six largest UK-listed renewable investment funds from 1 October 2025 to 4 February 20261.
Our analysis showed that, after the government’s proposal was released, there was a general reduction in share price of each fund. Their combined market capitalisation fell by 4.5% between 31 October 2025 and 12 November 20252.
Confirmation of the intention to proceed with an immediate switch, as opposed to a temporary freeze and gradual realignment with CPI, helped reduce uncertainty and saw the value of shares start to stabilise. The long-term impact of the switch to CPI-based indexation remains unclear.
Contact us
To find out how the change affects your renewable energy business, please contact us.
Our team provides independent valuations for a wide range of contexts including, and not limited to, financial reporting, implementation of share schemes, tax compliance, regulatory requirements and commercial purposes.
1 S&P Capital IQ Pro database
2 CIQ Pro: UK subsidy changes risk denting sector confidence, renewables investors say
