Open consultation

Changes to inflation indexation in the Feed-In Tariffs (FiT) scheme: consultation document (HTML)

Published 31 October 2025

Applies to England, Scotland and Wales

Introduction

The Feed-in Tariffs (FiT) scheme was launched in 2010 with the aim of supporting small scale electricity generation (up to 5 MW), particularly by organisations, businesses, communities and individuals that had not traditionally engaged in the electricity market. The technologies supported are limited to solar PV, onshore wind, hydropower, anaerobic digestion, and microcombined heat and power (<2 kW). It provides fixed payments to households, businesses and communities for the electricity they generate and export to the grid. The scheme operates across Great Britain and excludes Northern Ireland. The UK government has the power to amend the FiT scheme for Great Britain. The scheme was closed to new applicants in April 2019, with existing installations continuing to receive payments under their agreed terms.

The scheme continues to play an important role in powering the country - 850,000 individual generators receive FiT payments. Ensuring the scheme provides stable and consistent support to these generators, at a fair cost to consumers, remains a priority for the UK government.

In an increasingly unstable world, the only way to permanently protect hardworking people and businesses from increased energy bills caused by volatile global gas markets is to accelerate our pathway towards greater energy independence through the deployment of clean energy. The UK government is committed to lowering consumer energy bills within its parliamentary term. This includes finding efficiencies within the energy system where this offers the potential to improve affordability for consumers.

Making changes to the way that the FiT scheme is adjusted for inflation would bring it into line with regulatory best practice, as well as reducing the overall scheme cost in future by decreasing the rate at which costs increase with general inflation. Lowering levy costs will also support wider UK government priorities, including efforts to reduce industrial electricity prices. The Industrial Strategy, launched in June 2025, set out a series of electricity price relief schemes, with a commitment to fund these through reductions in levies and other energy system costs. The proposals in this consultation, if implemented, could contribute to that goal.

The UK government recognises the important balance that must be achieved between ensuring that generators continue to receive an appropriate return on their investments andmanaging costs to consumers.

General information

Why we are consulting

The UK government is seeking views on proposals to change how the cost of the FiT scheme is adjusted annually for inflation.

Consultation details

Issued:

31 October 2025

Respond by:

5pm on 12 December 2025

Enquiries to:

Email: RO@energysecurity.gov.uk

Consultation reference:

Changes to inflation indexation of the Feed-in Tariffs scheme

Audiences:

We are seeking the views of renewable electricity suppliers, generators in receipt of support via the FiT scheme, and any bodies who represent them. We are also interested to hear from consumers and groups that represent their interests.

Territorial extent:

The FiT scheme operates across Great Britain. This consultation seeks views from respondents across Great Britain (excluding Northern Ireland).

How to respond

Your response will be most helpful if it is framed in direct response to the questions we have asked, though further comments and evidence are also welcome. When responding, please state whether you are responding as an individual or representing the views of an organisation. Electronic responses are preferred, but we will also consider hard copy responses sent to the address below. Please send your response to the DESNZ Legacy Schemes Team (details provided below).

Respond online

or

Email to:

RO@energysecurity.gov.uk

Write to:

Legacy Schemes Team
Renewable Electricity Directorate
Department for Energy Security and Net Zero
6th Floor, 3-8 Whitehall Place
London
SW1A 2AW

Confidentiality and data protection

Information you provide in response to this consultation, including personal information, may be disclosed in accordance with UK legislation (the Freedom of Information Act 2000, the Data Protection Act 2018 and the Environmental Information Regulations 2004).

If you want the information that you provide to be treated as confidential please tell us, but be aware that we cannot guarantee confidentiality in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not be regarded by us as a confidentiality request.

We will process your personal data in accordance with all applicable data protection laws. See our privacy policy.

Quality assurance

This consultation has been carried out in accordance with the government’s consultation principles.

If you have any complaints about the way this consultation has been conducted, please email: bru@energysecurity.gov.uk.

The proposal

Policy context

The FiT scheme was introduced at a time when renewable electricity was significantly more expensive and wholesale electricity prices and capacity market payments were relatively low. Generators faced higher capital costs than those building new generating assets today. The support provided by this scheme, alongside other schemes such as the Renewables Obligation (RO), has played a large role in bringing forward the successful renewable electricity sector that we see today in the UK, as well as contributing to reductions in technology costs.

However, the schemes leave a cost legacy and one that is ultimately borne by consumers through levies on electricity bills. This cost has been rising over time; the scheme’s value is forecast to be £1.9bn in 2026 to 2027. Though the FiT scheme is closed to new applicants, support will be provided to generators until 2043. In the context of persistent high energy prices that consumers face, the UK government thinks it is right to explore all avenues to bear down on costs in the energy system to support energy bill affordability.

In this context, we considering changes to the way that the FiT scheme costs are adjusted for inflation. We are consulting separately, but in parallel, on similar changes to the RO scheme. Currently, both schemes are – in different ways – adjusted for inflation by Ofgem annually in line with the Retail Prices Index (RPI).

Under the FiT scheme, both generation and export tariff levels are adjusted. These adjustments were included in the scheme design to ensure that the value of the financial support kept pace with overall UK inflation. This was intended to maintain investor confidence, ensure the long-term viability of projects and avoid any erosion in the nominal value of subsidy over time. At the time of their design, RPI was a commonly used metric across government contracts and financial instruments and was seen as the lead measure for general inflation.

Historically, RPI has reflected a higher rate of inflation compared to other indices such as the Consumer Prices Index (CPI) (see below Figure 1). This is largely due to the differing methodologies of RPI and CPI, with RPI tending to overestimate annual growth compared to CPI.^{[footnote 1]}

The Office for National Statistics (ONS) have been vocal on the shortcomings of RPI as a measure of inflation, stating that any use of RPI over superior alternatives should be closely scrutinised. Accordingly, in 2019 the UK Statistics Authority proposed replacing RPI with CPI including owner occupiers’ housing costs (CPIH)^{[footnote 2]}, citing its historical shortcomings. Following a joint consultation, the UK Statistics Authority and HM Treasury confirmed in November 2020 that the methodology for calculating RPI will be phased out by February 2030 and replaced with the methodology for calculating CPIH.

Figure 1: OBR projections for RPI, CPI and CPIH. The plot also shows the rate of change for RPI if the CPI methodology was used (which will occur from 2030)

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Description of figure 1:

Figure showing the OBR projections for RPI, CPI and CPIH to 2037. RPI rises to 310.6, CPI to 289.7 and CPIH to 239.5.

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We believe it is important to uphold the original intent behind inflation indexation of the FiT scheme – namely, to provide a stable revenue stream that maintains its value over time. However, the government considers that indexing to the RPI has overcompensated generators and increased the policy costs of the scheme over time. This effect was heightened by unexpected inflation surges from 2022, which increased scheme costs beyond original expectations.

Policy proposal

The UK government is proposing changing how the cost of the FiT scheme is adjusted for inflation in future. Without pre-emptive action, changes to indexation would otherwise take effect in 2030, in line with the ONS’ decision to realign the RPI to the CPIH. This would see scheme costs continue to rise in line with RPI in the short-term.

The UK government believes that alternative methods should be considered. We consider thata more proportionate and fair approach would be to change the price index used to annually adjust the FiT scheme costs for inflation from the RPI to the CPI. This approach would ensure generators continue to receive a stable and predictable return, whilst making savings in the energy system, and preventing further overcompensation. The UK government believes this change should be implemented at the earliest opportunity to prevent overcompensation and, subject to legislative schedules, intends to implement changes for April 2026 ahead of the next scheduled annual adjustment.

The rationale for change is as follows:

• CPI is generally a more stable and widely used measure of inflation – CPI is the UK government’s preferred inflation measure due to its international recognition and consistency. It is used in uprating various state benefits and pensions. It also underpins the Bank of England’s inflation targets. The RPI is now widely considered to be an outdated and unsuitable measure of general inflation in the UK.
• Avoiding overcompensation of generators – The RPI overestimates inflation, resulting in higher revenues for generators than they would have received had their payments been indexed to CPI or CPIH. Changing indexation to CPI will continue to give generators a reasonable and predictable rate of return and protection against inflation whilst making savings in the energy system. The RPI and CPIH include housing costs such as mortgage interest payments and private rents, which we do not consider relevant to the FiT scheme. The scheme was designed to encourage renewable energy generation and was not meant to account for housing costs. The CPI excludes these costs, making it a more accurate reflection of the cost pressures faced by scheme participants for their renewable electricity generation.
• Reducing the burden on consumers – The costs of the FiT scheme are recovered through levies on electricity bills, passed on to consumers via suppliers. Changing inflation indexation to the CPI would reduce future consumer bill costs. For example, if inflation indexation on the FiT scheme was switched to CPI in April 2026, there would be an estimated saving of £20m in scheme compliance year 2026 to 2027. This would rise to an estimated saving of £70m in 2030 to 2031 or approximately £2 per year for an average GB household. We are also consulting on changes to the RO scheme; if the indexation of both schemes was switched to CPI, there would be a total estimate savings of £100m in scheme compliance year 2026 to 2027 and £310m in 2031 to 2032, or approximately £5 per year for an average GB household. The savings are greater if indexed to CPI vs CPIH.
• Alignment with broader policy and regulatory direction – Transitioning to CPI indexation would reflect a more consistent approach across government support mechanisms toward a more accurate and equitable inflation metric. Many of the major support schemes in the energy industry use CPI-based indexation to ensure that these reflect economic conditions without overcompensating. For example, Contracts for Difference (CfDs), Renewable Heat Incentive (RHI) tariffs and aspects of the Capacity Market (CM) are all CPI-indexed in different ways.

To address concerns around overcompensation and ensure a fairer inflation adjustment mechanism for the FiT, the UK government is considering 2 options for transitioning from the Retail Price Index (RPI) to the Consumer Price Index (CPI). Both options aim to deliver a more proportionate approach to inflation indexation, reduce costs to consumers, and align with broader government and regulatory policy.

Option 1: Immediate Switch to CPI Indexation

This option would involve a simple switch in the price index used to adjust the FiT scheme costs from the RPI to the CPI. Subject to legislative schedules, the UK government would look to implement ahead of the next annual adjustment scheduled in March 2026 which would see the FiT scheme costs increased in line with CPI. This approach would ensure generators continue to receive a stable and predictable return that maintains its value, whilst making savings in the energy system.

Option 2: Temporary Freeze and Gradual Realignment with CPI

This alternative would involve freezing the tariffs at the 2025 to 2026 level, taking effect from April 2026 (subject to legislative schedules). The government would calculate a ‘shadow’ price schedule for the tariffs from 2002, annually adjusted using CPI instead of RPI. No further inflation-linked increases would be applied until the cumulative effect of CPI-based inflation on that shadow prices matches the current RPI-adjusted buy-out price. At this point of realignment(estimated to occur in the mid-2030s), annual indexation would resume using CPI.

This option goes further than Option 1 and would not only prevent further overcompensation in future but gradually realign scheme costs after presumed historical overcompensation caused by RPI’s tendency to overstate inflation. It could stabilise scheme costs in the short term and transition to a more sustainable inflation measure over time. This would bring with it greater long-term savings for consumers, as scheme costs would be held steady until CPI and RPI inflation realign. We estimate that in scheme compliance year 2026 to 2027 this could save consumers around £60m, rising to an estimated saving of around £230m in 2031 to 2032.

The UK government is seeking views on which of these proposals presents the best alternative to the current methodology of RPI-indexation of the FiT scheme. We are mindful that the FiT scheme encompasses hundreds of individual tariffs, each tailored to different technologies, commissioning dates, and installation sizes. Attempting to freeze all these tariffs simultaneously to enact the changes proposed in Option 2 would require an extensive and highly technical intervention.

We are also aware that any change needs to be balanced against the broader impacts on renewables investment in the UK, which is essential to protect consumers against volatile fossil fuel prices. This is particularly pertinent in a period where the sector is focused on delivering the UK government’s Clean Power 2030 mission.

Consultation questions

1. Do you agree that CPI is a fairer and more accurate measure of inflation for adjusting the FiT tariffs than RPI? If not, why not?

2. Of the 2 options, which do you think is the best alternative to the current methodology, and why?

3. Do you have any comments on the likely impacts of the proposed change for generators, consumers or investors?

4. Do you think there are alternative approaches that should be considered, and if so, what are these and why?

Next steps

All responses to this consultation will be reviewed and analysed by the Department of Energy Security and Net Zero (DESNZ). We will publish a response to the consultation, which will provide a summary of the views expressed by the respondents. It will also detail whether the UK government intends to proceed with the proposed changes, in what form, and when.

Subject to the consultation outcome and ensuing legislative process, the UK government intend to make changes to inflation indexation before the start of the next scheme compliance year on 1 April 2026. The UK government will lay a license condition modification to change the inflation indexation of the FiT scheme. The proposal would, if implemented, affect all accredited generators across Great Britain (England, Wales and Scotland).

1. ONS (2018) Shortcomings of the Retail Price Index ↩

2. ONS (2019) UK Statistics Authority Statement on the future of the RPI ↩