Wednesday, 29 June 2016

ANALYSIS: Brexit spells uncertainty just when it's not needed, By Andrew Lee, Recharge News, June 24 2016

West of Duddon Sands

The UK's offshore wind sector has led the world in deployment

The 52%-48% ‘Brexit’ vote – overturning the predictions of most commentators – has already claimed the job of UK Prime Minister David Cameron, who led the ‘Remain’ campaign, and now takes the country and the EU into uncharted territory as the bloc sees one of its biggest economies walking away.
Energy policy, let alone renewables, was a sideshow in a campaign dominated by debates over the economy, national sovereignty and – above all – immigration.
But as the UK faces an exit process from the EU lasting two years or more, several major issues touching clean-energy policy and renewables will confront whoever succeeds Cameron as Britain’s Prime Minister.
The outgoing Prime Minister’s Conservative government has already taken the axe to large swathes of the UK support mechanism for onshore wind and PV, and he will be remembered as the leader whose promise to lead Britain's "greenest government ever" ended up ringing hollow.
But all eyes will be on the country’s world-leading offshore wind sector.
The UK already has more than 5GW installed and is set to double that by the end of the decade thanks to major investment decisions already set in stone and underpinned by government contracts – projects such as Dong’s 1.2GW Hornsea 1 and Iberdrola’s 714MW East Anglia 1.
But into the next decade, continuing growth will depend on the UK’s domestic clean-energy targets – soon to be disentangled from those of the EU – and the trajectory of government support for low-carbon sources, not to mention wider economic factors.
The offshore sector seemed to regain some certainty in the last six months, when UK energy secretary Amber Rudd and finance minister George Osborne signalled a commitment to new contract-for-difference auctions and a general ambition for up to 10GW of new offshore wind in the 2020s.
But Rudd and Osborne were both supporters of remaining in the EU, and their political futures under whoever replaces Cameron are far from clear. The triumphant right-wing of the Conservative Party, which may well supply the next UK leader, has a record of lukewarm support at best for renewables, tipping into outright climate-scepticism in some quarters.
Another less immediate source of uncertainty for UK renewables investors could emerge with fresh calls for an independence referendum by Scotland – the UK’s onshore wind heartland that is also seeking to build a significant offshore sector – where the majority voted to stay in the EU.
With such forces coming into play the UK energy sector faces more uncertainty at a time when it can least afford it – the period when critical investment decisions need to be made for offshore wind deployments in the next decade.
A spokesman for Vattenfall, one of the key investors in UK offshore, said: “Vattenfall is in the UK for the long term to grow its sustainable energy business thanks to a generally supportive energy policy framework, legally binding climate targets and strong market fundamentals.
"We still want to grow in the UK, particularly in wind power, but clearly a significant change like an exit from the EU introduces more risk to the sector for an unforeseen period of time. We aim to understand and assess that risk on an ongoing basis, as we would with any policy or treaty change.”
Dong Energy, the sector leader both in the UK and globally, said: "Like many other businesses, we will await clarity over the implications of the vote to leave the European Union.
"However, we don’t believe that UK energy policy is dependent on EU membership and we are confident that Dong Energy will continue to make an important contribution towards providing UK homes with a low carbon electricity supply in future."
The country’s clean energy industry will hope that in the long-run, the UK’s domestic climate goals, commitments under the Paris Agreement and the overriding global trend towards decarbonisation will ensure a sound investment base.
But as in so many other areas, the next few years will be a bumpy ride for renewables in Britain.

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