CPI replaces RPI in Renewables Obligation from Apr 2026

England and Wales have updated a key rule in the Renewables Obligation. A statutory instrument made on Thursday 26 March 2026 and in force from Friday 27 March 2026 switches the inflation index used in the scheme from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI) for obligation periods that begin on or after Wednesday 1 April 2026. The Order is signed by Michael Shanks, Minister of State for Energy.

If you teach economics or energy policy, this is a tidy real‑world case for CPI versus RPI. We’ll walk through what the Renewables Obligation (RO) does, why the index matters, and how to explain the new calculation to your students with a quick worked example.

The RO requires every licensed electricity supplier serving customers in England and Wales to present a set number of Renewables Obligation Certificates (ROCs) for each megawatt hour they supply. Ofgem administers the scheme and issues ROCs to accredited renewable generators based on their output; generators then sell those certificates to suppliers.

Instead of presenting a ROC, a supplier can pay a set cash amount to Ofgem called the buy‑out price. If some suppliers default, a back‑stop called mutualisation asks the rest to cover the shortfall up to a limit known as the mutualisation cap. Both figures are uprated each year for inflation, which is the part that has just changed.

Up to and including the obligation period that started on 1 April 2025, uprating followed RPI. From periods starting on or after 1 April 2026, uprating follows CPI. In the Order, CPI means the ‘all items’ CPI published by the Office for National Statistics, or any substituted index or figures if a month is not published.

Here’s the method in plain English. For each obligation period after 1 April 2026, take last year’s buy‑out price and increase or decrease it by the percentage change in CPI over the 12 months ending 31 December of the previous obligation period. Round to the nearest penny, with half a penny rounded up. The mutualisation cap is adjusted in exactly the same way.

Teaching note you can use in class: CPI and RPI both track inflation but use different methods. CPI is the UK’s headline measure and has often come out slightly lower than RPI. That means, when inflation is positive, CPI‑based uprating may rise by a bit less than RPI would have; if CPI falls, the figures can also go down.

Try this worked example with your students using made‑up numbers. If last year’s buy‑out price was £60.00 and the relevant 12‑month CPI change was 3.8%, the new buy‑out price would be £62.28 after rounding. If last year’s mutualisation cap was £100.00, the same CPI change would make it £103.80. These are illustrative only, not official rates.

Date sense‑check for lesson planning: the 2026–27 obligation period begins on Wednesday 1 April 2026, so it uses CPI measured over the 12 months to 31 December 2025. The 2027–28 period will use CPI over the 12 months to 31 December 2026, and so on. Getting those windows right helps students practise careful reading of policy timelines.

Who is affected in practice? All licensed electricity suppliers in England and Wales. Renewable generators still earn ROCs from Ofgem as before; today’s change only alters how two scheme values are uprated. Any effect on household bills would be indirect and depends on wider market conditions, not this amendment alone.

On process, the Order states that ministers consulted the Gas and Electricity Markets Authority (Ofgem), Citizens Advice, Consumer Scotland, relevant suppliers and other appropriate parties. Parliament approved the draft by affirmative resolution in both Houses, and the legal changes slot into articles 66, 67 and 73 of the 2015 Order.

For your records and citations in class notes: this is Statutory Instrument 2026 No. 380 - the Renewables Obligation (Amendment) Order 2026. It was made on Thursday 26 March 2026 and came into force on Friday 27 March 2026. No full impact assessment was produced because the RO is treated by the Office for National Statistics as a notional or imputed tax rather than a regulatory provision.