Brexit doubt weighs on green energy groups

EU’s largest renewables producers downplay concerns over changes to UK policy. The financial uncertainty triggered by the UK’s vote to leave the EU has sent shudders through virtually every industry, but Europe’s renewable energy sector faces even greater insecurity.

The successful Leave campaign was led by severaBrexit doubt weighs on green energy groups 1l political figures opposed to tackling climate change by replacing fossil fuel power stations with wind farms and other sources of renewable energy. The campaign’s strategy committee included Lord [Nigel] Lawson, founder of the Global Warming Policy Foundation think-tank which says the science of climate change is “not yet settled”. Brexit figurehead Boris Johnson, the former mayor of London, once questioned global warming during a snowy winter and likened wind farms to a “hideous Venusian invasion” that is “crucifying our landscape”. None of the contenders to replace David Cameron as prime minister are vigorous renewable energy advocates and one, Michael Gove, was once accused of trying to downgrade climate change in the national schools curriculum. (Find out about government failings regarding renewable energy) With the UK political landscape in a historic state of disarray, it is unclear how the future government will behave. But the Leave victory raises questions about whether years of cross-party consensus on the need to combat global warming may fray.

The EU’s largest green energy companies have so far been careful to downplay concerns about the sector in the UK, which last year had a market value of £16bn and employed close to 117,000 people, according to the Renewable Energy Association. Denmark’s Dong Energy, which is building some of the UK’s largest offshore wind farms, says the UK’s energy policy is fundamentally driven by the need to replace worn-out old power stations. Marianne Wiinholt, chief financial officer, says the subsidies Dong receives for its UK offshore projects are based on fixed private law contracts between the company and the government, “and will thus not be affected by the outcome of the EU vote”. As for the tumbling pound, Ms Wiinholt says the company has already hedged most of its cash flow for 2016 and 2017 as part of its ordinary currency hedging.
Germany’s Siemens, one of the world’s largest wind turbine makers, says the general uncertainty triggered by the Brexit result may stall long-term plans to eventually export turbine blades from its new £160m factory in the Yorkshire city of Hull. But the Hull investment itself is secure.

Drax, owner of one of the world’s largest renewable power plants, says it also has long-term hedging in place for its huge North Yorkshire coal and biomass electricity station, for which it imports large quantities of wood pellets from the US.
But Drax, like many other EU renewable generators, has shaped its business strategy around a series of existing UK government climate commitments, including biomass subsidies and phasing out coal power stations by 2025.
The energy secretary, Amber Rudd, a prominent Remain campaigner, told a climate change conference last week that the existing government was still committed to all such policies, even if the Brexit vote made it “harder” for the UK to tackle global warming. She pointed to the cross-party consensus vote in favour of the UK’s 2008 Climate Change Act, which commits the UK to an 80 per cent cut in greenhouse gas emissions by 2050, adding that “leading Leave campaigners have made it clear they remain committed to it”.

The act’s goals are more far-reaching than some EU targets, a point Dong has highlighted. However, the existence of this homegrown law has not stopped renewable energy opponents from trying to water down support for green energy subsidies in the past. To ward them off, some ministers have argued the UK is legally bound to help meet EU-wide climate and energy targets requiring 20 per cent of the bloc’s energy to come from renewables by 2020. But once the UK leaves the EU, it may no longer be constrained by such goals, let alone newer 2030 targets that underpin the bloc’s commitments to the Paris climate accord agreed in December. The UK could follow the path of Norway, which is not an EU member but has agreed to be bound by the bloc’s climate targets. But no one can be certain. Still, legal experts say there could be some benefit for the industry from a Brexit, if it waters down costly EU rules protecting birds and other wildlife. Plans for some of the UK’s biggest wind farms have been scaled back or ditched after companies hit hurdles stemming from the EU’s birds and habitats directives.

Such cases underline the “over-regulation” of the wind farm industry as a result of EU rules, says Jennifer Ballantyne, a planning specialist at the Pinsent Masons law firm. But the fate of these rules, like all others based on EU policies, is now very far from clear.


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