BURNING QUESTIONS
United Kingdom more freedom to provide subsidies to technologies of its choice (although, the United Kingdom would still be subject to WTO regulations and would probably need to introduce similar state aid rules to those applicable in the European Union). The European Union also imposes environmental constraints on renewable projects, which can particularly affect onshore and offshore wind developers from establishing windfarms in potentially productive locations that are prohibited under EU law. While the European Union undoubtedly provides an integrated and developed framework for renewables, this sometimes comes at the cost of innovation. The question which will be answered in the coming years will be whether the United Kingdom’s post-Brexit renewables regulation will benefit from opportunities offered by greater freedom, or whether the United Kingdom will continue to be subject to EU legislation, but will merely have painfully extricated itself from its position of influence at the negotiating table. Brexit also raises a number of questions in respect of policy certainty and investor confidence in the United Kingdom’s energy infrastructure. The economic uncertainty created by Brexit is likely to give rise to the deferral of investments in the United Kingdom’s renewable sector and there has so far been a mixed response to Brexit from investors. The United Kingdom’s vote to leave the European Union has led to the decision by Siemens to put its wind Investment Investor confidence and government policy
power operations in the United Kingdom on hold until the United Kingdom’s future arrangements with the European Union have been clarified. However, DONG Energy, the world’s largest offshore wind developer, has issued a statement saying Brexit will not threaten its plan to invest £6 billion in the UK offshore wind sector over the course of the next decade. It remains to be seen whether investment in future renewables projects will be deferred, but it is promising to see large investors such as DONG Energy express long-term commitment to the UK market. The UK government’s recent commitment to the Fifth Carbon Budget should ease anxieties in the renewable sector that Brexit would end the government’s commitment to the development of a low-carbon economy. However, a recent report published by Ernst & Young shows that the United Kingdom’s attractiveness for renewable energy investment is at an all-time low. The report cites the government’s decision to opt for gas and nuclear instead of renewable energy, along with the early closure of the Renewables Obligation regime as the main contributing factors. It is therefore arguable that policy decisions made by the government prior to Brexit will have a greater lasting impact on the renewable sector than Brexit itself. EU funding In addition to the uncertainty surrounding government policy, a number of EU initiatives to promote investment in energy infrastructure may now be jeopardised following Brexit. Funding from the European Investment Bank (EIB) and the European Fund for Strategic Innovation may be withheld. Brexit will also affect the United
Kingdom’s funding for energy innovation and research from the European Research Council and the Eighth Framework Programme, Horizon 2020, which runs until 2020 and has a total budget of €70 billion. The EIB represents an important source of funding for UK renewable projects, having invested €7.2 billion (£5.59 billion) since 2007. The United Kingdom has been the biggest beneficiary, receiving 24% of these funds – significantly more than any other country. Post-Brexit, it is unclear if the United Kingdom will continue to receive funding from the EIB for renewable projects. Non-EU countries have received only 12% of the funds that have been allocated by the EIB so far and, by leaving the European Union, there is the possibility that the United Kingdom could lose access to billions of pounds for renewable projects. However, the United Kingdom remains one of the main shareholders in the EIB with a 16.11% shareholding, and it is perhaps premature to speculate on the EIB’s long-term investment in the United Kingdom without clarity on the timing and conditions of the United Kingdom’s withdrawal from the European Union. There is also unlikely to be a withdrawal of support for renewable projects which are already funded by the EIB. However, current projects will need to examine the terms of their credit agreements to establish the impact of Brexit. Currency and cost A further issue which may have an impact on investment in UK renewables in a post-Brexit scenario is the weakened pound and subsequent higher costs of investment in renewable energy. The pound fell to a 31-year low
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