As the pressure on the British government to hold a referendum on the question of whether or not Britain should remain a member of the European Union (EU) increases, the associated debate on this subject is also increasing in temperature, with many businesses, unions and trade associations condemning such a move. For example, a majority of the members of the Confederation of British Industries (CBI) business lobby believe that a British exit from the EU (‘Brexit’) would be highly damaging to British business and would also increase the risk of isolation.
“The majority of CBI member companies of all sizes want to remain in a reformed EU” said John Cridland, CBI director-general, in a statement last year. “The fundamental choice here is whether Britain wants to be a global citizen or retreat behind national borders. The needs of the modern world increasingly don’t recognise either the Berlin Walls or the Hadrian’s Walls of the past.”
Two British utilities, SSE and Centrica, have also expressed their support for continued EU membership because of the benefits of continued integration with the European energy market, as has the National Grid.
So how would Brexit affect the UK renewable energy sector?
Britain’s National Grid would still remain a member of the European Association of Transmission System Operators (ENTSO-E) which helps to develop technical EU rules affecting power grid users. It would therefore also retain a role in helping to develop these rules all over Europe. Britain’s position after a No vote would depend largely on the government, which could opt to remain a member of the European Economic Area (EEA) as is the case with Norway. On the other hand, it could also decide to follow Switzerland by limiting UK participation in the European Free Trade Area (EFTA). Continued membership of the EEA would enable the UK to remain in the European single market but it would also require the country to abide by common EU law in certain areas, including renewable energy targets and membership of the European Emissions Trading Scheme (ETS).
Image: Jim Champion, Flickr
A British exit from the European Union (EU) is likely to have significant impacts on the structure of the UK renewable energy market, according to Frank Gordon, Senior Policy Analyst at the Renewable Energy Agency (REA). The UK could lose access to innovations and research across the Channel and it may lead to the country missing opportunities for manufacturing and research as the global clean energy supply chain grows, and it would directly impact our national renewable energy targets.
“On the other side, leaving the EU would mean we would not be subjected to the need for State Aid approval” Mr Gordon added. “This would increase the scope of potential policies and speed at which Westminster could approve major industrial policy and infrastructure projects. UK membership of the EU certainly raises issues for the domestic renewable economy, but these are largely issues that can be managed or fixed internally.”
According to the REA, Brexit would have a range of impacts on the UK renewable market. Some of them would be beneficial to the country, but others not so.
If the UK left the EU immediately, it would not have an impact on the country’s commitment to its renewable energy targets, but it would have a significant impact on the negotiations around targets to 2030. UK decarbonisation is guided by the UK Committee on Climate Change (CCC) and the Climate Change Act (2008). The CCC publishes new carbon budgets every four years, which the government must act upon. Neither the act nor the CCC would be endangered by ‘Brexit’, but there may be an impact on the process of negotiating new carbon budgets and new technologies and thus there may be an impact on the pace of decarbonisation as well as the form it takes. A lack of EU participation would allow a government in place at the time to slow the rate of UK decarbonisation.
State Aid rules prevent the use of direct government support for industries that would undermine the principles of competition and free trade in the EU. The applications for State Aid approval typically take one year to process and this has the effect of slowing the development of particular types of infrastructure.
Image: James Blunt, Flickr
If UK policy was not subject to State Aid rules, the design and implementation of policies intended to support particular industries would be reduced. There would be minimal impact on policies that are already in place, such as Contracts for Difference (CfD) or Feed-in Tariff (FiT) schemes but for new infrastructure projects, such as the construction of new nuclear plants, the impacts would be significant as there would be a reduction in regulatory hurdles.
One advantage of Brexit is that it would remove the UK from Minimum Import Pricing (MIP) which tends to artificially inflate the cost of solar panels imported into the EU from China by about 10 percent. The REA has long advocated its removal as it makes solar panels installed by British consumers more expensive.
Brexit may slow the growth of interconnectors and the cross-border trading of electricity. At present, the UK imports a significant amount of electricity from abroad, mostly from France, via interconnectors – subsea HVDC cables. Brexit may therefore affect UK energy security as well as the ability of the country to compete in the energy market. It may also affect future energy investment and the carbon content of UK electricity supplies. However, at present, the exact impacts on electricity trading between the UK and France are unclear.
Britain’s withdrawal from the EU may affect funding for innovation in the sciences, business, and engineering, much of which is provided by the EU. This in turn would impact UK universities and companies involved in research and development. The EU funds that could be affected in this way include European Research Council (ERC), tenders for the Directorate-General for Research & Innovation, Horizon Prizes, Innovation Union and the EU Contest for Young Scientists.
The rate of VAT applied within the UK may be impacted by Brexit, affecting the cost of items such as wind turbines, solar panels, labour and capital costs. At present, the EU does not allow reduced rates of VAT on renewable energy and energy efficiency items.
EU waste and recycling directives, within the Circular Economy package, would affect anaerobic digestion and biogas because the UK would no longer be required to comply. This would run the risk of substantially less ambitious regulations replacing them, affecting separate food waste collections which are essentially for the UK anaerobic digestion sector and production of biogas.
With regard to the UK low carbon vehicle sector, the EU’s E5 policy requires the UK to set a 5 percent level of petrol content from ethanol and the REA is currently pushing for an E10 requirement of minimum 10 percent ethanol content. Some countries around the world, such as the US are using an E30 level. Furthermore, free transfer of skills, research, and manufacturing may be affected by Brexit through the creation of barriers to the UK’s ability to access electronic vehicles (EVs) as well as impacting the country’s ability to be a major component in the global EV supply chain.
The Fisker Karma plug-in hybrid electric vehicle (PHEV) (Image: Steve Jurvetson, Flickr)
With the recent scrapping of the Zero Carbon Homes (ZCH) policy by the government, EU efficiency regulation becomes more important as it ensures that ZCH standards will be mandatory by 2020. Brexit would therefore remove the UK from this obligation, changing the market for renewables and energy storage units incorporated into new buildings.
Some renewable technologies, such as biomass, depend on the import of fuels and other goods from outside the EU, for example the majority of Britain’s wood pellets used in biomass burners are sourced from the US. Brexit would mean the negotiation of a separate trade agreement with the United States and a number of other countries. It is entirely possible that any new agreement would be much weaker than that negotiated by the EU.
The UK renewable energy sector is also dependent, in part, on the transfer of skills from other parts of the EU, such as Germany with regard to energy storage. British membership of the EU enables greater internal movement of technologies and skills and this also applies to other technologies such as nuclear.
While there may be some benefits to a UK withdrawal from the EU, overall there are a number of important advantages to remaining a member, particularly with regard to the pressure to achieve national targets in renewable energy, waste and recycling.
“As with most things, Britain’s removal from the EU would bring pros and cons for the renewable energy industry” said Phil Foster from Love Energy Savings. “Although withdrawing from the Union would obviously protect businesses in this regard, it’s important to remember that the UK also has its own highly-ambitious, legally-binding carbon emissions reduction targets to meet by 2050. Whether we’re part of the EU or not, businesses simply cannot escape the fact that they have to play their part in the global war on pollution. It’s also worth noting that an eventual Brexit could cause significant ripples in the energy market. Although the UK has now got to the stage where 25% of its energy stems from renewables, our reliance on fossil fuels is still high, and the nation’s withdrawal from the rest of Europe could result in a severe energy price hike.”
Mr Foster added that although the UK government has reined in renewable energy subsidies over recent months, the country is still an attractive place for green energy developers to invest. However, this could change drastically if the UK votes in favour of an EU withdrawal.
I am an experienced freelance journalist with a wide and varied portfolio to my credit including web content, magazine articles, reporting, features, interviews, reviews and blogs. My special interests include environmental issues, particularly climate change, renewable energy, transport, green building and sustainable infrastructure. I have numerous secondary interests ranging from politics and current affairs to social justice, science, technology and innovation, historical topics and lifestyle subjects such as literature, psychology, contemporary spirituality and culture.