Energy companies are getting “no clarity” from the government about what they should do to prepare for a no deal Brexit, according to the Confederation of British Industry (CBI).
Tanisha Beebee, senior policy adviser on energy and climate change at the business body, said the notices being provided by the Department for Business, Energy and Industrial Strategy (BEIS) about the UK withdrawing from the EU without a deal on 29 March are “very, very basic”.
At a briefing organised by the Energy and Climate Intelligence Unit (ECIU), she said that that the department has been holding workshops, including in Northern Ireland and London, about energy Brexit preparations.
But the energy sector is “not getting a lot of information” about what it should do to prepare for a “no deal”, Beebee said: “We’ve been asking for clarity, but they are struggling to provide answers.”
She said energy companies are starting to stockpile materials, which was not even being considered “four to six months” previously.
The potential hiatus resulting from a lack of components and other materials could be a particular headache for companies bound into contracts for difference (CfDs) where payments are triggered by hitting key “milestones” on particular deadlines, Beebee said.
She also warned that the introduction of greater friction into the trading of electricity across the interconnectors between the UK and the EU could push up energy bills.
“It could mean a smaller number of players in the market, which has implications in the long term on costs of electricity and liquidity in the market.”
But the energy system would not be immediately disrupted by a “no deal” Brexit, she said: “We have been assured that day one nothing will change and everything will be similar: it will be a medium to longer term issue.”
Antony Froggatt, a senior research fellow in energy and environmental issues at the security thinktank Chatham House, said that European Investment Bank (EIB) loans to UK energy projects had already fallen from £2 billion in 2014 to £392 million last year.
Munir Hassan, partner and head of clean energy at CMS Cameron McKenna, said that the kind of projects that might lose out from lack of access to EIB funding are “borderline” technologies like energy from waste and floating offshore wind.
But he said a bigger threat to investment in the energy industry is any wider knock to confidence in the UK economy and government.
Factors, like the stability of the British political system, enabled UK projects to command lower interest rates on loans than their counterparts in many other countries, Hassan said: “If we had a one per cent increase in the cost of money coming in that a pretty big impact on cost of energy.”
He also expressed confidence that the pan Ireland Single Electricity Market would continue to operate even in the event of a no deal Brexit. “It just has to continue.”