If ever there was a word which could be worn out, ‘Brexit’ would be in with a real shot at being it – there hasn’t been a day since the referendum, that I can remember, where I haven’t either heard it being debated amongst colleagues, friends, family or by different media outlets. But what will Brexit mean for renewable energy and the politically whipped industry in the UK? As with all things Brexit, there is no straight answer and there is, as always, plenty of confusion for both investors and the general public. The very short and simple answer is that nobody knows, but we can expect some changes, and thankfully, they aren’t all as gloomy as some may have predicted.
One worry is that the UK government may give up on, and not replace the 2020 targets for green energy, meaning that we will no longer be aiming to produce 15% of our energy from renewable sources by 2020. The reality here though, is that a lot of the planning is already in place to meet this, not to mention our obligations under the Paris Climate Agreement. As long as these obligations are not disrupted, then any efforts already made seem to be secure. This is because the construction, planning permission, grants, subsidies and all the rest that goes with it, require a long lead time and so many, particularly wind farms have already been set in motion in preparation for completion before 3 years’ time.
The second reason why it is unlikely to change a lot in the first instance, is that Britain’s own unilateral climate change act imposes tougher requirements for cutting carbon emissions. Under this the UK has aimed to cut its emissions by 80% from 1990s levels by 2050. This will still remain in the post Brexit era.
The largest problem caused by Brexit is one, not only for the renewable sector, but for every sector. During the complete uncertainty of the whole thing, our Prime Minister’s words of clarity – “Brexit means Brexit,” left things as clear as a snowman in a blizzard. Investors’ trust was gone, and then it was buried by the manifesto promises of the current government to ‘halt the spread’ of onshore wind farms and then came the icing on the cake, Theresa May’s decision to scrap the energy and climate change department!
What has happened?
This led to the UK dropping on the renewable energy country attractiveness index, and left investors looking for more secure assets in which to invest their capital. This change in investor mind-set and the sudden drop in the value of the pound after the vote, did however, have one positive effect on the UK sustainable industry.
Particularly in forestry, investors possibly saw it as an opportunity to tie capital to a more perceptively secure asset – forestry. As a real asset, it will hold its value through any economic troubles to hit the digital world, for many of the same reasons as agricultural land does. A tree is still worth a tree, no matter how bad the cyber sphere gets.
The drop in the value of the pound and the uncertainty of what’s to come, perhaps also married to the fact that the Scottish government is very friendly towards the forestry industry as it is a large part of the economy in rural Scotland, meant a boost to the investment in forestry. Capital that may have been tied up abroad was liquidised and moved back to hold in real asset value. Another factor may have been the potential that has been seen by some in the industries future, outside of the EU’s CAP (common agricultural policy), which had a devastating effect on the UK forestry industry, leaving planting schemes hugely lacking and the future very gloomy.
Confor (Supporting sustainable forestry) released a leaflet outlining the ‘once in a lifetime’ opportunity which has arisen and their vision for a thriving timber and forestry sector in a post Brexit world, their 5 key points needing to be addressed, and how to address them. The positivity has been criticised though, in that it must be supported by the UK government and not just the Scottish.
Support for the sector
Public attitude towards the renewable sector is certainly now in a position of agreement that something should be done to change the way we source our energy. When polled recently in a survey undertaken by Cleanearth energy, an overall majority of small and medium-sized enterprise business owners (SME’s), 88% to be precise, agreed that businesses have a duty to be environmentally responsible. This, however, only converted to 33% saying they believed that current policies adequately supported efforts to combat climate change, and as a result, 51% had not undertaken measures to adopt renewable technology in their businesses.
Bearing in mind that as of February 2017 (the time of writing this article), we haven’t actually Brexited yet. The effects cannot have been felt from something that hasn’t happened. What we have experienced prior to this time is a movement in the market of investors trying to secure their capital and businesses, preparing for the changes that are about to happen – nothing more than market forces so far.
The reality is that at this time we have to wait to really know what will happen to the sector once we leave. With the public vigorously opposed to fracking, our secure energy future will rely heavily on the government actions undertaken in an EU-free environment. With a renewables-friendly government, the future could be an investor-friendly, cleaner and more productive one. Combined with a reduction in regulation, it could easily lead to a boost in the industry and greater uptake of technologies, so long as technologies can still become, and remain, cost effective. As they are currently on track to Brexit, this could mean a new lease of life for a sector riddled with past uncertainty, but until anything material actually happens we are stuck in the Brexit limbo.