Greencoat UK Wind and other renewable energy investors have raised concerns over UK government proposals to change the inflation indexation under the Renewables Obligation (RO) scheme, warning that the measures could erode investor confidence and increase the cost of capital for new projects.
The government consultation, published on October 31, outlined two options: switching the RO buy-out price from the Retail Price Index (RPI) to the Consumer Price Index (CPI) from March 2026, or freezing the current price until CPI “catches up” around 2034–35.
Greencoat said both options would amount to retrospective revisions of government-backed contracts, undermining the predictability that has supported billions of pounds in renewables investment. Its initial analysis suggests the first option would reduce net asset value by 2.4p per share, while the second would cut 10.6p.
“Investors have made good faith investments into UK renewable energy projects based on stable, government-backed, inflation-linked support,” Greencoat said. “Retrospective revision to the RO will inevitably erode investor confidence.”
The company added that uncertainty could push up the cost of capital, raising the cost of new renewable energy for consumers. Greencoat noted that the government estimates the change would save households about £3 a year by 2030–31, while even a small increase in capital costs could outweigh those savings.
Greencoat proposed alternatives such as a voluntary Contract for Difference (CfD) mechanism, which it estimated could cut household bills by £30 a year while remaining value-neutral for investors. “Renewables can further reduce consumer bills in the near term,” the company said. “Generators and investors would receive price certainty through a voluntary scheme, and consumers would enjoy a price lower than the current market level without volatility.”
The company also emphasised the importance of stable investment conditions as UK electricity demand is expected to rise around 30% by 2035, amid the planned retirement of nuclear and gas capacity. “Renewable energy projects, in particular onshore wind and solar, remain the cheapest and quickest to build forms of new generation in the UK. It is therefore vital to retain investor and consumer support,” Greencoat said.
Chairman Lucinda Riches added: “We will continue to navigate this market backdrop through strong sector leadership and disciplined capital allocation. Our attractive proposition and track record since IPO positions us well and we are resolutely focused on doing the right thing for shareholders.”
Other funds, including NextEnergy Solar Fund and The Renewables Infrastructure Group (TRIG), have also voiced concerns. Minesh Shah, managing director of TRIG, told reNEWS: “It could undermine investor confidence when private capital is critical to further the UK’s energy ambitions and fuel economic growth, while having an uncertain impact on household bills. We will be engaging with government to make our views heard over the coming weeks.”
The consultation has prompted a drop in market value for major UK-listed renewables funds, highlighting investor sensitivity to potential policy changes.
