“This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”
Supporters of the UK’s exit from the European Union enjoy quoting Winston Churchill and, to us, this one is most apt. The UK officially left the EU at 11pm on 31st January and is now in a transition period until the end of 2020 as the UK and EU negotiate new rules, including on trade. Now the hard work starts.
For companies in the wind industry investing between the UK and the EU, this isn’t the end of the uncertainty. Far from it.
Yes, there’s no doubt that the UK has left, but there is still a risk that it will do so without a trade deal. Prime Minister Boris Johnson has said this week there is “no need” for the UK to follow trade rules set in Brussels, whereas the EU’s Michel Barnier said an "ambitious" trade deal needed a “level playing field”.
The arguments are far from over, and it cannot be taken for granted that the main players will start work from a starting point of regulatory convergence. But the fact the UK has now left should remove some vitriol from the debate.
Brexit’s impact on wind
Our view is that Brexit has had a limited impact on UK wind so far.
For onshore wind, the big hit came before the referendum when, in 2015, the Cameron government ended financial support for new onshore wind farms.
This has contributed to a decline in wind farms commissioned onshore in the UK from 343 in 2017 to 23 in 2019, according to RenewableUK.
In addition, construction started on only one new wind farm in 2019.
This is in contrast to offshore wind, which has gone from strength to strength, with over 8.5GW installed and a goal to hit 40GW by 2040 – despite concerns from Ofgem that the offshore transmission grid won’t be able to cope.
The main risk is Brexit will make it harder for investors in both sectors due to the additional barriers that could be erected. Any new trade deal could result in extra custom requirements and tariffs from January 2021.
WindEurope has said in a briefing to members that tariffs on components in a UK-EU trade deal were “extremely unlikely”, and tariffs on raw materials were also unlikely but possible.
Another potential barrier is to the movement of personnel, including German engineers, to work on UK offshore wind farms even if the UK and the EU can agree a trade deal. Post-Brexit Britain will likely include tougher visa rules.
And the note added that non-replication of EU trade defence measures could boost the relative competitiveness of wind industry manufacturing in the UK. This will depend on whether the UK chooses to follow EU rules in this area, so isn’t guaranteed. There's still a huge amount to be decided.
In our view, there are reasons to be positive.
The first is that three murky years are at an end. Yes, uncertainty will continue for now, but companies can at least be clear that Brexit is happening and the form that it is likely to take. They can now take key investment decisions.
The second is support for offshore wind remains, and the UK has expertise that can be exported to new markets in North America and Asia. In addition, we will see more pressure on government to include onshore wind in its net zero planning – despite the claim from ex-minister Claire O'Neill that Johnson “doesn’t get” climate change.
And third, we see plenty of evidence in this industry that professionals in the UK are committed to keep working closely with their cousins in continental Europe to ensure the low carbon energy transition happens. The joint venture revealed by Denmark’s Procon Wind and UK-based CPower earlier this week to overcome Brexit challenges is one example.
Perhaps we are naïve. If Brexit has taught us anything it is that public debate can always sink lower. But for now let’s be positive because, well, why not?
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