The Six Dangers that Brexit Poses to Renewables by Alex O‘Cinneide

With the UK set to vote this month on whether to remain in the EU, Alex O‘Cinneide warns that a ‘no’ vote could be catastrophic for the renewables sector both in the country and further afield:

We’ve already heard from Secretary of State for Energy and Climate Change Amber Rudd that Brexit would cost an extra £500 million ($700 million) in energy bills for UK consumers, but surprisingly little has been said about what the impact would be on the UK’s renewables sector and the pressure to reduce carbon emissions in the energy sector.

Perhaps we have heard very little of what an independent UK would look like in these terms because so many eurosceptics are also climate change deniers (think Lord Lawson, Owen Patterson).

The impacts, however, could be catastrophic and everyone else should certainly be worried about what the impacts of Brexit might be on the renewables industry across Europe.

Here are six ways in which Brexit would shake up the renewables sector:

1) The UK regresses on its renewables targets:

While the UK has committed to some carbon reduction targets through the Climate Change Act in 1998, many of the international targets such as those agree at Paris last December are set at the European level, meaning that the flagship renewables targets for 2020 and 2030 would no longer be binding if the UK left.

While the UK is unlikely to completely abandon the targets (it was, after all, instrumental in pushing for them) we could certainly imagine an under-pressure UK government taking the opportunity slip further on its renewables policy.

Even if the UK recommitted to meeting its current targets, the damage to investor confidence would mean untold wasted opportunities in the intervening period.

2) The UK loses €7 billion ($7.8 billion) in funding for energy projects:

One thing we can be relatively sure of is that the UK would lose its funding from the European Investment Bank, which is a critical funder of capital intensive projects in the UK.

In 2014 the EIB invested €7 billion into the UK, of which half were energy projects.

Projects already funded by the EU would be placed into dramatic uncertainty as they try to work out whether their funds can be redirected, or prepaid, or (failing emergency UK government support) they go bust.

These projects include some of the most crucial infrastructural investments to the UK, supporting the general grid infrastructure as well as the all-important development of a renewable power supply.

3) Investment in energy connectors fall, threatening our energy security:

Currently the UK relies on a wide range of infrastructure to provide energy. Gas connectors import 8% of the gas we burn and electric cables from France pick up the supply when the UK grid is under strain.

The situation is even more interlinked in Northern Ireland where the entire system is interdependent with the committedly EU nation to the south.

If the UK were to leave, these connections wouldn’t disappear but the political will to create and maintain new projects would be severely damaged and, inevitably, the future investment for them would be reduced. This development would leave the UK more isolated, and facing wider range of energy problems than it does currently.

4) The UK moves from policy maker to policy taker:

The UK has traditionally had a very strong voice in the EU policy developments, particularly around the liberalisation of the European markets. Exiting would make the UK move from being a policy maker to a policy taker.

The UK might negotiate to stay part of the bodies that co-ordinate the EU energy policy or, failing this, it might just closely follow the EU’s policies.

For instance, the UK might continue to participate in the EU’s cap-and-trade scheme to reduce emissions but it wouldn’t be have any of its current influence on how the policy is decided.

5) Coal plants are forced to stay operational for longer:

As the UK’s energy infrastructure is put under greater strain, the temptation to extend the lifetime of the UK’s coal power plants would be massive.

Currently, the plan is to close all the UK’s coal stations by 2025, but that project is based on the ability of the UK to develop the renewable and gas capacity to replace them.

Exit from the EU would create the flexibility for the UK to slip on this target though, as future governments might find tempting if projects like the troubled Hinckley Point nuclear plant fail to deliver. Indeed, we have already seen creeping attempts to do so, given the pre-existing strain on the UK grid; the government has recently offered to maintain subsidies for two of the UK’s largest coal plants.

6) European leadership on global environmental policy declines:

An EU without Britain would be a radically different political animal, and this would change the face of future European energy policy.

Would we still expect the EU to lead in pushing for renewables targets globally as it did in Paris in 2015?

Would European policy still push for liberalised markets in the same way, or would we see a drift towards sanctioning more protectionist national renewables schemes?

The loss of Britain’s voice in this mix would likely reduce the ambition of the EU; but more than that, it might even affect its ability to have a unified global energy policy.

The fear of further political fragmentation would reduce its ability to lean on individual members and achieve ambitious consensus.

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