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"The threat of a UK government cancelling subsidies or otherwise interfering with renewable energy projects raises significant issues under UK administrative law, contractual protections and international investment law."
The threat of a UK government cancelling subsidies or otherwise interfering with renewable energy projects – whether through policy reversal, permit withdrawal, contract cancellation or legislative change – raises significant issues under UK administrative law, contractual protections and international investment law.
Whilst Parliament remains sovereign and can legislate to halt or restrict projects, investors typically benefit from layered protections that limit arbitrary cancellation and offer substantial compensation.
This article analyses the available legal remedies for renewable energy projects at risk of being impacted by regulatory changes.
Relevant policy context
In an increasingly unstable world, we are seeing the UK Government take increasing decisive and intrusive steps to ‘take back control of our energy system’ and ‘to lowering consumer energy bills’.
In the spring of 2026, the UK Government implemented retrospective changes to the indexation mechanisms for Renewables Obligation (“RO”) and Feed-in Tariff (“FIT”) projects which came into force from April 2026 by replacing RPI with CPI indexation.
We also saw the Electricity Generators Levy being raised from 45% to 55% from 1 July 2026 on exceptional revenues and being extended beyond 2028.
Mayor of Greater Manchester Andy Burnham (who is running for leadership of the Labour party) has recently suggested putting “energy” under public control.
Meanwhile, Reform UK’s policies include ‘scrapping net zero and related subsidies’ which would equate to scrapping subsidies, such as Contracts for Difference (“CfDs”), for renewable energy projects. It is unclear how far ranging such policies would be and whether they would also apply to RO and FITs or apply retrospectively.
There has also been the threat by Reform to ban overhead cables and overturn planning consents.
These government-led changes have the potential to materially alter the economic framework on which investments in renewable energy projects are made, threatening to make the UK a less attractive market for funders and developers, as well as delaying and raising the cost for projects under construction.
For changes in regulations and contracts, such as CfDs, there may be remedies and recourse available to developers and funders.
Parliamentary sovereignty vs legal constraints – parliamentary supremacy
The UK Parliament can:
- repeal or amend legislation underpinning renewable subsidies (e.g. energy acts);
- introduce new restrictions on planning or grid access; and
- remove financial support mechanisms such as CfDs.
Key implication:
There is no constitutional bar to cancelling policies, subsidies or projects via legislation, however, this is constrained by downstream legal consequences.
Administrative law constraints
Judicial Review
Government decisions can be challenged for:
- illegality(including distorting competition);
- irrationality; and
- procedural unfairness,
If it can be shown that a government body did not make a decision legally and rationally, the court may order the decision be remade, taking into account the correct legal position and all relevant considerations. In some cases, it may also be possible to claim damages.
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"If it can be shown that a government body did not make a decision legally and rationally, the court may order the decision be remade, taking into account the correct legal position and all relevant considerations."
Key point:
Judicial review claims must be filed ‘promptly’ and no later than three months following the date on which the grounds for the claim first arose. Identifying the specific decision which needs to be challenged requires careful consideration, as government policy approaches can often be developed over time.
Legitimate Expectation
As part of a judicial review, developers may argue that government representations created a legitimate expectation that a specific policy would continue or a specific project would proceed.
Courts may intervene where:
- policy reversals are procedurally unfair; or
- there is no rational justification.
Limitation:
Legitimate expectation rarely prevents a clear statutory change but it is stronger against abrupt administrative reversals.
Property Rights and Human Rights
Under the Human Rights Act 1998 (Protocol 1, Article 1), investors have a right to peaceful enjoyment of possessions including property, licences, leases, contractual rights and shares.
A cancellation could be challenged as interference with property rights. This may be done in tandem with a judicial review or other claim.
The government can override this right but:
- must show public interest justification; and
- ensure proportionality.
Key point: claims under the Human Rights Act 1998 have a one-year limitation period. They are often brought together with judicial review claims, meaning there is an even shorter period to consider whether or not to bring a claim.
Investment Treaty Arbitration such as under Bilateral Investment Treaties (“BIT”), Energy Charter Treaty (“ECP”) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“CPTPP”)
Government decisions can be challenged for:
- directly or indirectly taking assets (expropriation) without fair market compensation;
- unfair and inequitable treatment (“FET”);
- failing to maintain a stable and predictable regulatory framework;
- retroactive policy changes harming project economics; or
- arbitrary cancellation or subsidy withdrawal.
This remedy is available for non-UK entities who benefit from protection under the relevant treaties.
Financial exposure:
States have faced multi-billion-pound awards in similar energy disputes in Europe.
Planning Protections
Once granted Development Consent Orders (“DCOs”) or local planning permissions are legally robust. Revocation would have to be done by way of statute and if the planning permission is revoked, compensation is likely under the Planning Act 2008.
Key point:
Cancelling already-consented projects is legally and financially costly for government.
Contractual Protections
CfDs
CfDs (issued by the Low Carbon Contracts Company (“LCCC”)) are binding private law contracts backed by statute. There are no clauses entitling LCCC to terminate for change in policy.
Termination or other changes would have to be effected through regulatory amendments – changes in law could potentially trigger compensation claims.
Relational long-term contracts
If there are no contractual remedies under a contract, it could be argued that there is a duty to act in good faith – acting honestly and with fidelity to the bargain, being an obligation not to act in a manner that is:
- commercially unacceptable;
- improper; or
- unconscionable.
Practical constraints on major policy changes
Even if politically pursued, cancellation faces:
- fiscal cost (compensation, litigation);
- an impact on investor confidence (raising cost of capital across UK infrastructure); and
- international reputational damage.
"It is important to note that governments have a limited term in office and are therefore sensitive to delays and policies where they may encounter a lot of opposition and costs."
These factors create a strong deterrent against wholesale cancellation, favouring instead:
- prospective policy changes; and
- slowing approvals rather than revoking existing rights.
Spain, for example, has had 24 investment treaty awards against it – totaling US$1.6bn – as a result of withdrawing solar tariff subsidies it had granted investors.
An example of this is the renationalisation of the train franchises, rather than cancelling the franchises and facing large compensation claims arising therefrom, the government decided to wait until the franchises expired or defaulted before nationalising them.
Any proposed changes should be properly consulted upon, an example of where the UK Government fell foul of this are the changes it made to the FIT without due consultation which resulted in it losing a judicial review claim.
It is important to note that governments have a limited term in office and are therefore sensitive to delays and policies where they may encounter a lot of opposition and costs.
Conclusion
Whilst a government could legally pursue policies that undermine renewable energy deployment, including investor confidence, major changes in policy impacting existing projects could face significant legal barriers and financial consequences.
The UK’s legal framework – spanning contract, administrative law, human rights and international treaties – creates a layered system of investor protection that can make retroactive interference both difficult and costly.
Whilst existing projects have a certain degree of protection, projects under development would be more exposed, partly depending on how mature they are in the development cycle, including, for example, whether they have a signed CfD in place.
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