Opinion

Opinion: It’s too early to precisely predict Brexit impact on energy policy

Industry News

Following the historic vote to leave the EU, there are now a wide range of possible outcomes for the UK’s energy sector in respect of its regulatory and market options, and its relationship with the EU.

These will all have differing implications for investment and trade, and will depend on the fundamental decisions that the UK makes, including whether to seek to remain part of a Single Electricity Market (a scenario that is not dissimilar to the current position).

Other European nations, such as Norway and Switzerland are outside the EU and have voluntarily adopted much of the EU legislation, yet it will be a fundamental decision as to whether the UK will follow this route – if it chooses not to, then the single electricity market and climate change & emissions directives could entirely cease to apply in the UK, and there will be significantly greater freedom for the UK to choose its energy path, policy and structure.

The debate that will follow the vote during the next two years of negotiation will be intense, and there will be some fundamental decisions to make.

Decisions will need to be made not only on the energy market and trading arrangements, but also in respect of the participation in the EU ETS and in respect of EU targets for emissions and renewable energy.

The UK’s commitment to tackling climate change will come into focus and the UK will likely have to renegotiate its own climate change agreement under COP21.

Given the challenges and uncertainties faced by the energy industry in the last 12 months, it seems likely that the immediate outcome of the vote will be a hiatus where developers, generators, lenders and investment funds take stock.

Until more is known on the UK’s intentions for its future development of energy policy, both in the UK and within the EU, it is extremely difficult to predict the precise impact that the vote will have on energy policy.

Chris Gotts is energy partner at Burness Paull

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