UK RENEWABLES INDUSTRY FACES UP TO BREXIT 'PARADOX'

Regulations could be loosened but incentives to develop a low carbon economy lost, say experts

The UK's renewable energy industry could be harmed by Brexit with the loss of incentives to develop a low-carbon economy, legal experts have warned.


Pinsent Masons said a vote to leave Europe could remove legally binding carbon-free targets, which in turn could dilute the political will to deliver green power.

Glasgow-based planning specialist Jennifer Ballantyne, a partner in the international legal firm, today warned of the paradox facing the UK renewable sector if Britain opts for Brexit.

"It's a huge contradiction that Brexit could result in a system where it is easier to develop renewables infrastructure in the UK, but at the same time there could be no strong incentive to make it happen.

"There is good and bad for the industry in terms of the UK's current relationship with the EU. The downside is that some segments of the market - for instance onshore and offshore wind - are over-regulated, with the EU imposing particular requirements which means the development process needs to be conducted in a particular way and a layer of constraints and extra costs are introduced."

Ballantyne cited designated environmentally protected areas as an example of over-regulation and exactly the types of places where there would be interest in building onshore or offshore wind farms.

She explained: "Some in the UK have never been convinced by the science that underpins those protected designations, with concern expressed that some designations are politically motivated.

"Forward-thinking developers may already be reviewing their thinking around areas currently designated or proposed for designation as having EU protection on environmental grounds. If there is a relaxation at a UK level that could be both commercially significant and controversial."

However, the opportunity to radically overhaul regulation if Britain is out of Europe could be counter-balanced by the removal of legally binding carbon-free targets -which will undermine the political appetite to realise the full potential of renewables.

Ballantyne added: "On the plus side, the positives in the UK's relationship with Europe is that there are EU targets for reducing dependency on carbon-based energy. These are legally binding in a way that the likes of the Kyoto and Paris agreements are not, and Member States can be fined if they come up short.

"Currently a strong case can be made for new developments by reference to those targets and the threat of fines certainly helps to focus minds, especially where the government of the day does not accept the economic arguments in favour of leading the green economy.

"Conversely, removing the need to comply with those targets could remove the incentive for promoting the carbon agenda."

CHALLENGES AND OPPORTUNITIES

Pinsent Masons also highlighted that the removal of restrictive State Aid rules could have a significant impact on the renewables industry, while a new trade relationship could transform the profile of players in the UK wind sector.

Pinsent Masons' partner Gary McGovern, said: "There are opportunities. State Aid rules which impose a requirement to maintain a level playing field could be gone. For instance, a live issue currently is whether proposals to allow onshore wind projects on the Scottish Islands to retain access to the Contracts for Difference regime would fall foul of state aid rules if at the same time mainland wind projects are excluded."

"There could also be selective interventions to stimulate UK renewables manufacturing. All the major kit for renewable infrastructure is procured from continental Europe as there is little manufacturing base in the UK. There could be greater opportunity to stimulate that base through targeted action without fear of triggering State Aid rules, however there would be significant ground to be made up.

"On the other hand, it's striking that much of the current investment and financing for renewables comes from outside the UK, and a significant proportion of the major players in UK renewables are owned by European parents.

"For those subsidiaries of European businesses, or those reliant upon foreign investment, there will be concern over potential trade barriers which could make the UK a less attractive investment proposition"



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