Brexit uncertainty has ‘direct impact’ on energy companies

The uncertainty surrounding Brexit is already having an impact on energy suppliers, nine months ahead of the UK’s planned departure date from the European Union, Lawrence Slade has warned.

Energy UK’s chief executive made the warning in a blog post yesterday (5 July) ahead of the cabinet being locked down today at the prime minister’s country retreat at Chequers to hammer out the government’s Brexit strategy.

Slade writes that last week’s June EU council meeting failed to provide the industry with the clarity it “desperately” needs on the sector’s future policy and regulatory framework.

“This opacity around what the future framework looks like and when it would begin has already started to impact the energy sector.”

Uncertainty around whether the UK will remain in the European Emission Trading System (EU ETS) is “already having a direct impact on the day-to-day business of energy companies,” he said.

It is “extremely difficult” to price any thermal generation, resulting in “deep uncertainty” across the market, because companies do not know the carbon pricing mechanism that the UK will be in.

The ETS secure and promote obligation, which applies to larger emitters, will be extended to the winter period 2020/21 from 1 October.

The burden of the likely alternative to the ETS, a carbon tax, would fall on energy suppliers, pushing consumer prices up and making carbon reduction “less efficient and cost-effective”.

Slade also calls for the UK to “certainly not” disregard the emerging targets in areas, such as the renewable generation, outlined in the EU’s emerging “clean energy for all’ package.

He renews Energy UK’s calls to remain part of the Internal Energy Market, withdrawal from which “risks jeopardising all the work that has been done and that lies ahead”.

“The next couple of weeks must provide more clarity as to what the future looks like and for that reason I look forward to the publication of the Brexit white paper,” he writes, referring to the policy paper on the UK’s relationship with the EU which is due to be published following today’s cabinet meeting.