BREXIT – A brief view of some of the energy implications of the UK voting to leave the European Union

BREXIT

The result of the UK referendum over EU membership has potentially huge implications for renewable energy. Perhaps the most significant of these is the UK may no longer be in the EU Internal Energy Market (IEM).

Completion of the EU’s internal market requires the removal of obstacles and trade barriers; the approximation of tax and pricing policies and measures in respect of norms and standards; and environmental and safety regulations. The objective of these is to help create a functioning market with fair access and a high level of consumer protection as well as adequate levels of interconnection and generation capacity. The IEM has led to the development of interconnections, to help reduce isolation of Member States from the European gas and electricity grids. Being part of energy union would have provided a huge market for UK renewables, such as its growing offshore wind fleet. Furthermore, it would have benefited energy security as renewable generation increases its overall share in the grid, through smoothing of generation variability.

The National Grid are certainly fearful of an exit from the IEM, with a spokeswoman saying: “It is vital the UK retains access to the IEM, which provides stability for energy companies and helps keep household bills down…UK energy security depends on gas and electricity from the IEM and it is essential therefore that we take no risks with that. The issue of energy needs to be treated with the highest importance by the government as the negotiations on Britain’s exit begin.”

Key players and commenters in the sector are almost unanimously giving a negative outlook as a result of the leave vote. These include factors such as higher costs, consumer impacts and a likely reduction in funding of scientific research; but the result is perhaps best summed up by Professor Rob Gross, of Imperial College, who said: “victory for leave creates uncertainty, risks instability, weakens the UK’s negotiating position and, at least in the short term, discourages investment.”  The lack of stability and certainty will not only impact renewables but other low carbon energy projects; for example, the scraping of the controversial proposed nuclear power plant at Hinkley Point (which was to be built by the French company EDF) seems a likely outcome of the referendum.

It is clear that energy policy needs to be a priority for the new government, to give reassurance to the industry. However, even if it does become a priority it would seem optimistic not to view the vote to leave the EU as negative for the UK energy system and low carbon energy in particular.

Sources:

Quotes are taken from https://www.theguardian.com/environment/2016/jun/28/leave-vote-makes-uks-transition-to-clean-energy-harder-say-experts

For background information on the IEM http://www.europarl.europa.eu/ftu/pdf/en/FTU_5.7.2.pdf

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