Climate & energy: Life after Brexit

As the UK prepares for life outside the European Union – and outside the free market too, according to Chancellor Philip Hammond – politicians and commentators of all shapes and sizes have been pitching in with their ideas of how our future is going to look now that we've 'taken back control'.

There have been sometimes contradictory ideas put forward about our new relationship with Europe, the overall economic direction, the rights of EU citizens, and more.

Through these tangles, however, those responsible for the UK’s energy sector have been unusually agreeable with each other.

At a speech just days after the referendum result, then Secretary of State for Energy and Climate Change (DECC) Amber Rudd spoke of the importance of progressing along the path to affordable, secure and sustainable energy, highlighting the dangers of a changing climate, and extolling the importance of Britain leading the way in its mitigation.

Just days later Andrea Leadsom, then her junior minister at DECC and her opponent in the referendum debate, reiterated the same points but with added extra emphasis on the transition to a smarter, decentralised energy system that many in the industry, notably the National Infrastructure Commission and the trade body EnergyUK, are calling for.

Then came the creation of two existing government departments to form the new Department of Business, Energy and Industrial Strategy (BEIS). And it's headed up by a Secretary of State, Greg Clark, who has historically been as progressive as they come on energy and climate issues. The same goes for the rest of the Ministerial team.

Nevertheless... against the dark clouds/journey to the sunlit uplands (delete as appropriate) that Brexit entails, big questions remain. Here are some of them.

It's the economy, stupid!

On the economic front, we're £1.7 trillion and rising in debt, and several economic indicators suggest bumpy times ahead, certainly in the short-term. Then again, the government seems to be breaking with the recent past in abandoning George Osborne's 'austerity-über-alles' approach and hinting that it may borrow to invest.

The UK can't keep the lights on or decarbonise without building new stuff - generating plant, cables both national and international, and perhaps new gas infrastructure.

But there's already a crisis of investor confidence in the energy sector. Post-Brexit, will the government be able to reassure investors enough to ensure new stuff gets built at reasonable rates of return?

Meanwhile, not building new low-carbon stuff will sustain higher reliance on fossil fuels which are, increasingly, imported - and therefore more expensive than in pre-Brexit days, if the pound remains depressed.

In Europe, but not of it

The decision on what level of integration Britain retains with Europe is likely to be decided primarily on the issues of free trade and immigration. But it'll certainly have implications for the energy sector.

In particular, to what extent will the UK participate in continent-wide power and gas markets? Will plans for electrical interconnection (an additional 9GW according to the March Budget [pdf link]), be affected?

Will British companies continue to take part in the EU Emissions Trading System - and if not, how else might the UK constrain emissions from industry and the power sector?

While it's almost too late now to affect whether we meet our EU target of sourcing 15% of energy from renewables by 2020, presumably the UK will expressly divorce itself from the EU 2030 targets... unless we end up in the EEA, in which case we might not be able to.

Equally presumably, whatever happens we will continue to see the benefits of EU regulations making appliances more energy efficient, given that manufacturers are unlikely to make products just for the UK.

Meanwhile, post-Brexit realities mean that we're going to have to be extra-nice to countries with which we want trade deals in future. Increasingly, this means countries that take climate change seriously and have major decarbonisation plans in place - just think of China. What are they going to be looking for from the UK on this increasingly important agenda?

BEIS: Honey, or bumbling?

(The buzz is that this new department will pronounce itself 'bees', by the way, in case you're confused about the sub-heading above)

Back to investor confidence. The government is due to roll out a number of measures between now the end of the year that are collectively aimed at keeping the UK on course for decarbonisation while keeping the lights on. A consultation on the proposed coal-phase out is scheduled to be launched later this week; the next auction of Contracts for Difference (CfDs) supporting offshore wind development (£290 million for about 1GW) is due by the end of the year; and there's to be an Emission Reduction Plan running up to about 2030, also due by the end of the year.