The UK has signed off a technical but material tweak to the Renewables Obligation (RO): from 1 April 2026 the buy‑out price and the mutualisation cap for England and Wales will be indexed to CPI rather than RPI. The Statutory Instrument was made on 26 March 2026 and comes into force on 27 March 2026, following parliamentary approval. Equivalent measures are proceeding across Great Britain. (statutoryinstruments.parliament.uk)

Ministers opted for a straight switch to CPI after consulting on two options last autumn-either move to CPI or freeze the buy‑out price for a year before realigning. The official consultation outcome confirms the CPI route to lower scheme uplifts over time and align with wider regulatory practice. (gov.uk)

A quick refresher on mechanics. Suppliers can present Renewables Obligation Certificates (ROCs) or, instead, make a cash ‘buy‑out’ payment per missing ROC. Ofgem updates that buy‑out price annually and sets mutualisation parameters; for 2024/25 the buy‑out price was £64.73 and the England & Wales mutualisation ceiling was about £390m. For 2025/26 the buy‑out price is £67.06 and the GB obligation level used in planning is 0.493 ROCs/MWh. (ofgem.gov.uk)

What changes in pounds and pence? Ofgem’s worked example shows that using 2025 inflation, the 2026/27 buy‑out would land at roughly £69.81 under RPI versus £69.34 under CPI-a £0.47 gap per ROC. On an obligation intensity similar to 0.493 ROCs/MWh, that’s about 23p/MWh less on a pure buy‑out basis before any recycling effects. (ofgem.gov.uk)

For non‑domestic users on pass‑through contracts, even small tweaks scale. A site consuming 2GWh a year would see a ballpark £460 swing from that £0.47/ROC differential if suppliers pass it through in full and the obligation level is broadly unchanged. It’s not a game‑changer, but it is a credible line‑item to bake into 2026/27 budgets.

Generators will notice the index shift too, albeit indirectly. The cash alternative influences ROC trading dynamics and the recycle value paid back to suppliers that present ROCs. In 2022/23, Ofgem reports the notional worth per ROC was £59.76 (£52.88 buy‑out plus £6.88 recycle), and only about 11.5% of the obligation was met in cash buy‑out-most compliance came via ROCs themselves. That mix limits how far a slightly lower indexation bites into overall scheme value. (ofgem.gov.uk)

On risk management, the mutualisation framework-which spreads any qualifying shortfall across compliant suppliers-will now uprate with CPI from 2026/27. As a sense‑check, Ofgem set 2024/25 ceilings at roughly £390m for England & Wales and £39m for Scotland, while confirming mutualisation was not triggered for 2024/25 because shortfalls stayed below the threshold. A slower‑growing cap marginally reduces tail risk for suppliers over time. (ofgem.gov.uk)

Timing matters for finance teams. The CPI‑based figures for the 2026/27 compliance year will be published by Ofgem by 1 April 2026, giving suppliers a narrow window to align pass‑through schedules and update quoted non‑commodity rates. Expect rounding to the nearest penny as usual. (ofgem.gov.uk)

Why CPI? The Office for National Statistics has long said RPI is a poor measure of inflation and discouraged its use. Moving to CPI (and, elsewhere in government, increasingly CPIH) reduces methodological quirks and the perception of ‘index shopping’ between receipts and payments. (backup.ons.gov.uk)

Bottom line for Market Pulse UK readers: this is a tidy, credibility‑focused change that should trim the annual uplift on RO line‑items versus the old RPI method. It won’t visibly move household bills, but it is enough for SMEs to re‑run FY26/27 energy budgets and for suppliers to tidy up contract wording ahead of the 1 April switchover. (gov.uk)