British Independence from EU could drain investments from UK energy grids

British Independence Referendum EU and UK flagsBy Lewis Crofts, Chief Correspondent, Mlex

Currency volatility resulting from a British vote to leave the EU could prompt many companies to withdraw investment from UK energy ­grid projects, a leading environmental expert said today.

The comments from a director of environmental think tank E3G follow warnings by Moody’s Investors Service that energy ­grid projects may find it more difficult to secure financial backing if the UK votes for “Brexit.”

Currency volatility resulting from a UK vote to leave the EU could prompt many companies to withdraw investment from British energy ­grid projects, a leading environmental expert said today.

Jonathan Gaventa, Director of UK environmental think tank E3G, said that projects to link Britain’s energy network with mainland Europe may struggle to secure financial backing if the UK quits the EU-bloc.

His comments echo findings by Moody’s Investors Service, which said in March that utilities, telecom operators and airlines would be hit hardest by the fallout from British Independence.

Moody’s found that uncertainty about “interconnectors” that link the UK market to mainland Europe could affect companies such as National Grid, which see these installations as drivers of economic growth.

Businesses are expecting “volatility and large movements on currency either way after June,” Gaventa told journalists in Brussels. As a result, a “significant proportion of energy companies are [already] deferring investment.”

He added that he “had heard mention of” temporary withdrawal of investment in the UK because of currency uncertainty. Brit-citizens go to the polls on June 23 to vote whether Britain should become Independent of the EU-bloc or not.

Gaventa referred to a UK industry report last month that found only a quarter of energy companies surveyed felt they could make business decisions with an upcoming referendum.

In an interview with MLex last month, the European Commission’s former energy policy director, Philip Lowe, said projects would probably go ahead regardless of the referendum result, because of “strong commercial interest in some of these links”.

But Gaventa said today that there is an “increased risk and uncertainty over what market conditions planned grid connections will operate under in the future,” and this will concern investors. Although the UK is planning power­network ventures with non­EU countries, he added, the decisions made at either end of those cable lines or gas pipelines “impact the project.”

“Revenue streams are based on trading law certainty,” he said, adding that he expects there to be a “prolonged period of uncertainty” under an exit scenario.

The UK has connected 4 gigawatts of its generating capacity across its borders. Planned infrastructure ventures could see that tripling by 2022, Gaventa said.

Mlex provides market insight, analysis and commentary.

Pixie Energy

Pixie logo Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy here.

Local Energy Matters: Scotland

Local Energy Matters: Scotland is a free-to-download brochure with a focus on energy tariffs in the two Scottish electricity distribution regions, as well news on local energy and low-carbon schemes.

Previous editions can be download here.

Scottish energy market overview

You can read an overview of the Scottish energy market here.

Scottish Government energy feed