Renewable energy trusts have been in decline over the past week since the government announced a surprise plan to cut back subsidies to the green infrastructure sector.

These government incentives make up around half of these trusts’ income in many cases, so could have a material impact on their profitability should they be slashed.

Feed-in Tariffs (FITs) and Renewables Obligation Certificates (ROCs) have long been used to support renewable energy producers and the government had not planned to reduce these payouts until 2030, giving green infrastructure trusts plenty of time to adjust their models in advance.

However, these handouts could be pulled back as early as April 2026, making the impact ‘much more immediate’, according to Stifel analysts Iain Scouller and William Crighton.

This is due to a government proposal to switch indexation – or inflation-linkage – in the subsidy payments from the retail price index (RPI) to consumer prices index (CPI).

RPI, which has been described by the Office for National Statistics as ‘a very poor measure of general inflation’, has tended to run 1% about higher than CPI, according to Stifel. That means a change could reduce future income for renewables trusts. 

The shock consultation, which will conclude on 12 December, was revealed, quite fittingly, on 31 October.

‘Investors appear spooked by this moving of the goal posts,’ Scouller and Crighton said. ‘For a government that needs private capital to finance much of its infrastructure and renewables investment ambitions, this is not a good look.

‘Investors are likely to be wary of allocating further capital to the sector and are likely to demand a risk premium in case further changes come out of the blue, such as changes to subsidies.’

Previous governments were happy to grant these incentives in the past – in 2002 for ROCs and then 2010 for FITs – but could not have anticipated the sharp hike in energy prices in recent years.

The FIT scheme alone is forecast to cost the government £1.9bn in 2026/27, with the value of ROC ramping up to £8.5bn in 2026/27.

With chancellor Rachel Reeves looking to reduce the government’s around £25bn budgetary hole and UK households spending significantly more on electricity bills, cutting payouts to renewable energy companies could be a cost-saver.

A reduction of any kind could have a sizable impact on many renewable investment trusts, with the subsidies accounting for half of the revenues, and sometimes more, for Bluefield Solar Income (BSIF ), Foresight Environmental Infrastructure (FGEN ), Foresight Solar (FSFL ) and NextEnergy Solar (NESF ).

It could lead these high-yielding trusts to reassess their lofty dividend payments.

If the government’s cost-cutting mission stretches further to impact Private Finance Initiatives (PFIs) too, then broader infrastructure trusts could be also hit, according to Scouller and Crighton.

They highlighted HICL Infrastructure (HICL ) and International Public Partnerships (INPP ), which are relying on these incentives staying in place until 2030, though they may be less vulnerable than the renewables funds.

‘A lot will depend on how legally watertight the PFI contracts are on the indexation mechanism that can be used, with some in the industry suggesting they may be more watertight than the renewable subsidy mechanisms,’ Scouller and Crighton.

Renewable infrastructure trusts holding a lot of UK assets are particularly exposed to the subsidy rollback.

Bluefield Solar Income and Greencoat UK Wind (UKW ) hold their entire portfolios in UK assets, with these also making up the majority of Foresight Environmental, NextEnergy Solar and Foresight Solar’s holdings at 89%, 84% and 75%, respectively.

Octopus Renewables Infrastructure (ORIT ) looks to be the most well insulated, with just 40% of its portfolio held in UK assets. However, it will not be entirely shielded from cutbacks.

Of all these trusts, Bluefield Solar Income was the worst hit initially, with shares tumbling 8% on Monday.

Its income is particularly exposed to ROCs and FITs, but the downgrade was also exacerbated by its unpopular proposal to merge with its manager and do away with its investment trust status last week.

It scrapped this plan today after ‘a majority of shareholders expressed a clear preference for alternative value-maximising options’ and will instead look to sell the portfolio – that has helped the shares make up recent losses. 

Winterflood analyst Ashley Thomas said it was ‘unfortunate’ timing given the recently announced ROC and FIT wind back, making a potential sale challenging.

At time of writing, Greencoat UK Wind and Foresight Solar’s shares are both down 5% since last Friday, while NextEnergy Solar Fund is down 3.7%.