Greencoat UK Wind and other asset owners have warned that government plans to alter inflation indexation under the Renewables Obligation (RO) scheme would erode investor confidence and increase the cost of capital for future renewables projects.
The company’s statement follows the UK government’s 31 October consultation proposing two options for reforming RO inflation linkage – either switching the 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 measures would amount to retrospective revisions of government-backed contracts, undermining the predictability that has underpinned billions in renewables investment. The company’s initial analysis suggests the first option would reduce its net asset value by 2.4p per share, while the second would cut it by 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 warned that the proposals could have far-reaching consequences beyond the listed renewables sector, which it described as a bellwether for investor sentiment. In the five trading days following the consultation announcement, the six largest UK listed renewable funds saw their combined market capitalisation fall by about £400m, equivalent to around 5%.
Greencoat said the uncertainty would likely push up the cost of capital as investors demand higher returns to offset policy risk. “A small increase in the cost of capital would substantially increase the cost to consumers of new renewable energy projects and can reasonably be expected to outweigh the purported savings to consumers,” the company said, noting the government’s own estimate that the change would save households about £3 a year by 2030–31.
The company urged ministers to work with the renewables sector to find alternative ways to reduce household bills without damaging confidence or deterring investment.
It pointed to the potential for a voluntary Contract for Difference (CfD) mechanism under the Review of Electricity Market Arrangements, which would allow existing generators to agree a fixed price below wholesale levels. Greencoat estimated such a scheme could save households about £30 a year – ten times more than the proposed RO changes – 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’s statement also highlighted the growing need for stable investment conditions as electricity demand rises. UK demand is expected to increase by about 30% by 2035 due to electrification of transport and heating, alongside the planned retirement of a quarter of the country’s nuclear fleet and 20% of its 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.
Alongside its policy response, the company reiterated its confidence in its financial position and capital strategy. It confirmed its 2025 dividend target of 10.35p per share, equating to a total payout of around £225m.
Over the past 12 months, Greencoat has completed £222m in asset disposals and £198m in share buybacks under its £200m programme, adding 1.7p per share to NAV. The company said it continues to explore further disposals while maintaining “strategic flexibility” for future capital allocation.
Chairman Lucinda Riches said: “The Board and the Investment Manager recognise the complexity of the market and are committed to enhancing the Company’s long-term attractiveness for our shareholders.
“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.”
NextEnergy Solar Fund, alongside its investment adviser, NextEnergy Capital, a specialist solar investment manager with over $4.5bn of funds under management, meanwhile said they will emphasise that implementing either proposal “would prove detrimental for all stakeholders, including investors, energy consumers, HM Treasury and the UK economy more widely”.
“The Company has highlighted its concerns to its relevant trade associations and is working with its advisers to support the Company’s formal response, which will be made public in due course and will be available for review on the Company’s website,” a statement said.
Minesh Shah, Managing Director, The Renewables Infrastructure Group told reNEWS: “While TRIG’s diversified renewable and storage portfolio has relatively limited exposure to UK ROCs and FITs, such a policy shift would be concerning and at risk of being counterproductive.
“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.”