The impact of Brexit on wind energy deals is set to be a key talking point at our Financing Wind Europe conference in London on 1st November – and for good reason.
As the exit day of 29th March 2019 approaches, and with little clarity on what Britain’s exit from the European Union will look like, businesses in every industry – including wind – are facing uncertain times. Will Britain stay in the single market? Will we see import and export tariffs on goods and services to and from European Union countries? What about the free movement of workers? Even the so-called transition period is up in the air too.
It is these questions that will determine the future of the UK’s wind industry after Brexit. In practice, these questions are most pressing for offshore wind, given that the Conservative government cut support for onshore wind in 2015 and the planning system continues to be an obstacle for developers onshore.
Just last month, a group of businesses and organisations, including energy company EDF and trade body RenewableUK, wrote to Prime Minister Theresa May and EU Commission President Jean-Claude Juncker warning that, unless efficient tariff-free trade agreements were reached: “Brexit may create additional costs for sectors… such as offshore wind.”
Luke Clark, head of external affairs at RenewableUK, has also told us that that two factors will determine whether Britain’s offshore wind industry does indeed incur these additional costs. First, the supply chain impact; and second, the free movement of skilled workers.
While Britain’s offshore wind industry enjoys levels of local content nearing 50%, that still leaves half of its goods and services to be imported from other countries, most of which – given the prominence of European firms in the wind market – are in the EU. These are so closely entwined that any significant change to exports must affect UK-based companies.
Clark also highlighted the importance of sharing skills and expertise across borders. He told us: “If markets are unable to access that international talent, that will drive up costs. A Brexit deal that ensures the reciprocal movement of skilled workers is really vital.”
And this could happen. Prime Minister May has been pushing for a Brexit deal with the EU that achieves just that. However, her Chequers plan has incurred the wrath of many of her Brexit-backing ministers, and disagreements over the Irish border is holding up progress on negotiations too. This means that the possibility of a ‘no deal’ Brexit continues to linger.
Matthew Wright, UK managing director of Ørsted, has said a hard Brexit or a last-minute “no deal” could ‘cause a problem in terms of supply chains and movement of goods and people’. It seems clear that a ‘no deal’ situation would be the worst scenario for renewables.
Yet a ‘no deal’ Brexit does not have to be catastrophic.
One reason to be optimistic is the government’s pledge to open its Contract for Difference renewable energy auctions every two years from 2019-2030. This is a domestic policy, not an EU one – and should endure regardless of the form that Brexit takes, giving developers and investors some security.
Likewise, as we’ve heard many times before, people will still need to be able to turn on the lights after 29th March 2019, and the UK electricity system is still in need of upgrading. We see a need for wind farms whether or not the UK is in the EU, and they will need investment and technology from somewhere. There is no question of the industry surviving Brexit, even if there is no deal reached between the UK and the EU.
However, surviving doesn’t mean there won’t be any costs of Brexit – and it’s very different to the breezy pronouncements of the Brexiteers in the 2016 referendum campaign. As long as there continues to be support from the UK government, that will continue to support and bolster the offshore wind sector. Now we just need it to reverse its hostility onshore too.