Peers told Brexit is a ‘drag’ on infrastructure investment

Policy adviser warns “we can’t offer clear signals” to investments beyond 2020

Brexit is already acting as a “drag” on investment in new energy interconnector infrastructure, the House of Lords has been told.

The Lords EU energy and environment select committee held the opening session of its inquiry yesterday (6 September) into the UK’s energy security following its withdrawal from the EU.

Joseph Dutton, policy adviser at energy consultancy E3G, told the committee that uncertainty over the UK’s participation in the existing pan-European energy framework was already having an impact on the programme of interconnectors which are designed to link the energy markets of the trading bloc’s member states.

“There is a drag already on new projects because of uncertainty,” he said, pointing to how Ireland was prioritising its proposed interconnector with France over that with the UK.

“We can’t offer clear signals to investors beyond the end of the decade, which is already slowing things down,” he said.

Lawrence Slade, chief executive of Energy UK told the committee that utilities wanted to know by next month on the UK’s status within the EU’s emissions trading scheme

“We looking for very, very quick guidance on the status of that funding,” he said

“With the uncertainty that Brexit beings it’s absolutely vital that the government shows clear and urgent leadership to UK energy policy.

“If this is not handled correctly, it could be a big issue,” Slade said, adding that the government also needed to publish its clean growth plan soon.

“Every bit of uncertainty adds to the cost of capital and adds to customers’ bills. It is absolutely vital that government provides that clarity.”

Dutton also told the committee that the UK’s reliance on trading energy with the rest of the EU will grow as a result of the closure of the Rough gas storage facility in the North Sea.

However Malcolm Keay, senior research fellow, Oxford Institute of Energy Studies, played down the risks of Brexit for energy security when he presented his evidence to the committee.

He said that there was no risk to the continued operation of the existing interconnectors or to the economic case for future such projects.

And Keay said that being outside of the internal energy market would make a “fairly marginal difference” to the UK’s energy security and that the UK energy sector could cope with the ending of access to EU funding, including the European Investment Bank (EIB).

He said: “They are useful sums but they are not critical: they will not stop projects going ahead. EIB money has been fairly significant but it is quite replaceable.”

Keay added that being outside of the EU could ‘concentrate minds’ on how to deal with the UK’s energy challenges, 

Exiting the EU could make it easier for the UK to develop the kind of  “more fundamental mar reform” of its energy policy, which may be required as a result of rapid developments in renewable energy.

“It’s not necessarily a bad thing going our own way because it will enable us to deal with our own issues.”

But he said that quitting the EU would make more difficult for UK utilities to participate in the intra-day trading arrangements, which the EU is developing as part of its latest phase of reforms to the internal energy market.