Energy

The impact of the vote to leave the EU on the energy sector is uncertain and will largely depend on the nature of the UK's continuing relationship with the EU. There is a risk that energy costs could increase as the value of sterling continues to drop, driving up prices for consumers and businesses (especially in energy intensive industries which have to compete globally). The current climate of uncertainty could also impact on investor confidence, and the funding and development of energy projects, so clarity will be important to maintain energy security and deliver the UK's decarbonisation goals.

Key stats

  • 140,000 employees
  • £36.2 billion GVA (2.2% of total GVA)
  • 76.7 million tonnes of oil equivalent exports
  • 154.8 million tonnes of oil equivalent imports
EU Trade: A barrier-free relationship with the EU is vital for the UK energy sector

As a net importer of energy since 2004 and with import dependency expected to grow, the UK's continued trade in electricity and gas across borders, and through interconnectors, particularly between Northern Ireland and the Republic of Ireland, is important for providing secure, reliable and affordable energy for UK customers. Additionally, barrier-free access in cross-border trading and preserving the benefits of joint harmonisation with our European partners will benefit the economy. Trade in goods and services is also critical to the efficient operation of the energy sector, and to future investment. While gas and electricity do not face high tariffs under WTO rules, it will be vital to avoid tariffs across the supply chain.

Regulation: As a highly regulated sector, energy businesses are seeking regulatory stability and certainty

A stable legal and regulatory environment is key for investment in the energy sector. Continued co-operation and engagement with EU stakeholders and Member States on energy policy issues will be important to safeguard the UK's future interests. This is particularly important in Northern Ireland which shares an electricity market with the Republic of Ireland. While it will be important to retain the benefits of the Internal Energy Market (IEM), continued participation will depend on the UK's ability to influence rules and standards that may still apply to our energy sector. The EU Emissions Trading Scheme (EU ETS) is a key instrument to drive decarbonisation in a lowest cost way. However, if the UK is
to continue to participate in the EU ETS, it will be important to secure a continuing say over its future development.

Clarity will also be needed over the UK's long-term participation in other key pieces of EU energy legislation, which have clear interactions with domestic policies and consequences for industrial competitiveness. A long-term vision will also be required for the UK''s role in international agreements, such as the Paris Agreement, which – while agreed on an international level – are implemented through EU regulation.

Migration: The UK's future immigration system should allow energy businesses to access the skills and labour they need

The UK energy sector currently faces a skills shortage in some areas, for example offshore wind farm engineers. The total number of jobs in the energy sector is also forecast to grow by 15.5% by 2022 [1] , so it will be vital to ensure all businesses continue to have access to the skills they need.

Funding: The energy sector is interested in new funding deals for both innovation and infrastructure

UK energy projects are currently able to compete for EU funding through programmes such as Horizon2020 and Projects of Common Interest, which can help with important investments. The UK is the biggest recipient of the EIB's dedicated energy funding, securing 24% of total available funds [2] . The government's announcement that it will guarantee funding for UK research and innovation projects under Horizon2020 is a welcome step, but there is a need to clarify the longer-term funding framework.

Exit: A smooth exit from the EU is needed to ensure certainty for investment in the energy sector

Given the range of energy regulations currently enforced by the EU, leaving without a deal would create an unprecedented situation. Domestic regulation could blunt some of these effects. However, the UK could lose the privileges of the IEM and joint legal mechanisms for managing the all-island Ireland electricity market. Avoiding this situation through a new deal, and interim arrangements if necessary, is imperative for current and future investments.

Our members say

"Swift action on domestic policy measures at the government's disposal could help mitigate much of the risk of Brexit in the energy sector and shore up investor confidence." - global renewable energy company

"Energy is a devolved power in Northern Ireland. Brexit could have an impact on Ireland and its 'All-Island' electricity market, and that's a concern for us." - UK utilities company

"We find it a real challenge to hire engineers experienced in building offshore wind farms. There's a very specific skillset involved, and at the start of new projects we inevitably need to draw on a global talent pool." - British electricity generation company
Our partners have more information:
  • BEAMA
  • EnergyUK
  • Scottish Renewables
  • The Association for Decentralised Energy

For energy at the CBI, contact Elsa Venturini on +32 (0)2 286 1139 or Elsa.Venturini@cbi.org.uk


References

[1] UKCES, Skills and performance challenges in the energy sector

[2] House of Commons Energy and Climate Change Committee

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