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Guidance

Moving the Renewables Obligation to the Exchequer

Published 4 November 2026

© Crown copyright 2026

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This publication is available at https://www.gov.uk/government/publications/energy-independence-bill-factsheets/moving-the-renewables-obligation-to-the-exchequer

Factsheet relating to the Energy Independence Bill.

Summary

At the 2025 Budget, we committed to take money off energy bills to tackle the cost of living. The changes we made at the Budget ensured that the April to June the price cap fell by 7%. The price cap for July to September increased by 13% and will increase by a further 4% to £1,723/year for October to December as the Iran War has pushed up international gas prices. However, the level of the cap is lower than it would otherwise have been were it not for the ongoing impact of moving the Renewable Obligation to the Exchequer, alongside other measures the government has taken.

Why are we legislating?

The affordability of energy is a critical issue facing this country. At the 2025 Budget[footnote 1] we took 2 decisions: to discontinue the Energy Company Obligation home insulation scheme, and to move 75% of Renewables Obligation costs on domestic bills to the Exchequer, resulting in money off energy bills for all domestic consumers.

We are currently relying on powers in the Energy Prices Act 2022 to enable the ongoing Exchequer funding of 75% of the domestic costs of the Renewables Obligation. Those powers need to be renewed every 6 months as long as they are being used. This measure provides new, enduring powers to enable this Exchequer funding.

What are the government’s objectives with this measure?

The government wants to put consumers and communities first by reducing costs on energy bills, so households benefit from more affordable and sustainable long-term prices. This is intended to improve energy affordability.

How will this measure deliver the objectives?

The Bill places the Exchequer funding of 75% of the domestic costs of the Renewables Obligation for 3 years on an enduring legal basis, removing around £90 a year of costs on average from household bills as part of the £150 reduction in costs announced in the 2025 Autumn Budget and implemented in April 2026.

A legally binding direction[footnote 2] currently requires suppliers to pass on to consumers all of the savings that they make from the Exchequer funding. This direction applies to all domestic contracts, including fixed-term energy contracts not bound by Ofgem’s price cap. The Bill includes a power to legally direct suppliers to ensure that they continue to pass on their savings to all domestic energy consumers until March 2029.

This supports efforts to ease pressure on low-income and vulnerable households by reducing their overall energy spending.

  1. HM Treasury (2025) ‘Budget 2025’ ↩

  2. DESNZ (2026) ‘RO and ECO costs schemes direction 2026’ ↩

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