Farm energy opportunities remain despite Brexit uncertainty

Although UK energy policy is heavily tied to European legislation, industry experts are confident renewable energy opportunities will remain outside Europe, albeit under a policy framework still to be decided.

The UK has led the way on carbon-reduction initiatives, such as the Climate Change Act (see ‘Energy policy’, below), and global policy drivers such as the Paris agreement on climate change will apply regardless of a decision to leave.

“Doing more on renewable energy is a necessity whether we are in or out of Europe,” says Jonathan Scurlock, NFU chief adviser for renewable energy and climate change.

See also: Decline in AD development predicted after UK policy changes

“Unless a new government abolishes the Climate Change Act, which had all-party support, there will continue to be a certain political focus on energy.”

It is a view shared by Matt Hindle, head of policy at the Anaerobic Digestion and Bioresources Association (ADBA), speaking ahead of the organisation’s trade event on 6-7 July.

“The Renewable Energy Directive is European-led, but the drivers for reducing emissions go beyond that, so there will be long-term opportunities.”

Short-term uncertainty

But in the immediate future there is mounting uncertainty about how much support any new government will give to renewables and what shape energy policies take during months or years of discussions.

An article in The Guardian, for example, reports German energy firm Siemens will freeze new investment in UK wind power until the relationship with Europe becomes clearer.

Energy secretary Amber Rudd insists government remains “fully committed” to tackling climate change during this uncertain time, with annual support for renewables expected to double during this parliament to more than £10bn.

However it is likely to take time before new long-term policies are in place.

“There has been a reasonable amount of uncertainty among developers for several months and this vote has done nothing to resolve that,” says Mr Hindle.

“The big question is what the framework of the UK’s involvement with Europe looks like. At the moment everyone’s guessing.”

He says it is too early to judge the vote’s impact on the number of biogas projects being built and of more immediate concern to many is the renewable heat incentive (RHI) consultation outcome, expected this autumn.

Alexander Creed from Strutt & Parker reports some hesitation among investors committing to new projects, particularly at the larger scale.

But he and others stress that existing EU directives and UK energy policies, such as the feed-in tariffs and RHI, have not changed and funding is still available, so there are opportunities.

“Those with projects that are complete or nearing completion have little to worry about.”

Farmers with energy projects at an early stage of development may need to re-examine their circumstances, considering finances, commitment to-date and wider reasons for investing, he says.

“Solar and biomass heating in particular still represent a good opportunity to convert low-cost capital into a higher return over a long period.”

Risks ahead include pressure on the Treasury-funded RHI budget if the economy falters dramatically over coming months.

Also, viability of some marginal projects could also fall if a weaker sterling pushes-up prices of imported equipment, says Mr Creed.

For example, the cost of solar panels, inverters, framing and installation on one large-scale project rose from £818/kW to £886/kW as the value of the pound slipped from €1.30 to €1.20 following the result, he notes.

“That kind of impact would add almost £3,500 to a smaller 50kW project on exchange rate alone.”

One possible benefit of Brexit could be the removal of duties on solar PV panels imported from outside Europe (principally China).

The UK is a net importer of panels and the Solar Trade Association estimates removing tariffs could save a domestic 4kWp array £397 (7%), or knock £123,000 off the cost of a 10MW solar farm.