Prices will rise and Brexit jeopardises British climate-change and economic targets, warns Energy Institute

Impacts of Brexit on Energy
Impacts of Brexit on Energy

Political risk must not undermine the essential need to provide reliable energy in a way that keeps emissions and prices down – this is the message from British energy professionals surveyed for the Energy Institute’s 2017 Energy Barometer.

This year’s Barometer is the first to take on board recent political upheavals. It gauges key concerns facing those working in the industry and sends a number of clear messages to the new Government as it develops its Industrial Strategy, the Clean Growth Plan to meet the fifth carbon budget and negotiates Brexit. The key results showed:

  • Access to skilled workforce is a Brexit priority, along with clarity and commitment on energy policy during the negotiations.
  • Existing EU energy and climate laws and close ties to the single energy market should be retained.
  • Energy efficiency ranked highest policy priority by energy professionals.​
  • Trump’s decision to withdraw the USA from the Paris Agreement is a concern, but surmountable.

The Energy Institute (EI) is the professional body for the energy industry.  President Professor Jim Skea, CBE, FEI, said: “The call for a predictable, no-surprises policy environment is reinforced in the 2017 Energy Barometer with clear advice to those negotiating Brexit.

“Workforce availability and the smooth transition of energy and climate change laws need to be priorities.

“The Barometer also reflects the need for ministers to bring forward a credible Clean Growth Plan to demonstrate how they intend to course-correct the UK’s emission reduction efforts. On the basis of current policies, the fifth carbon budget is seen by energy professionals as elusive.”

Steve Holliday FREng, FEI , EI Vice-President and former National Grid chief executive, added:“The stakes are high for the UK’s energy economy. The potential is there for significant industrial benefit and emission reduction at least cost to consumers and taxpayers, but sound policy making should not be drowned out by Brexit or other political upheavals.

“Energy professionals’ advice could not be stronger on putting energy efficiency at the heart of the Government’s strategy. The benefits of energy efficiency stack up for emission reduction, energy security, industrial growth and affordability.”

Expanded summaries of the key findings follow:

On Brexit

The UK’s withdrawal from the EU is seen by those surveyed as a material concern for the energy system; Brexit negotiations must not undermine effective energy policy in the UK.

Energy professionals urge negotiators to seek means of continued close cooperation with the EU single energy market.

Concern is acute in relation to any restriction on immigration affecting workforce availability.

If freedom of movement were curtailed, 60% of respondents anticipate a fall in the availability of skilled workers, in response to which 70% say the Government must pursue apprenticeship and training measures to meet the shortfall.​

The majority of respondents want the Government to transfer key EU energy and climate change directives into UK law – including on renewables, energy performance of buildings, vehicle emissions and civil nuclear.

Opinion is more divided on whether the EU Emission Trading System or state aid rules should be retained.

 

Energy policies, investment and prices

Energy efficiency is the number one priority for action. It is seen as having the lowest investment risk, and around half of respondents see policy in this area as having had a positive effect in 2016. Nevertheless efficiency policy still needs strengthening.

Efficiency is considered the top priority measure to lower emissions at least cost, and 64% of respondents rate it as key to seizing the economic advantages of the shift to low carbon, echoing the wider engineering profession’s response to the BEIS Industrial Strategy green paper

Energy policy needs strengthening: across almost all areas more than half of EI members think policy has had no effect or a negative effect over the twelve months. An exception to this is the support of new nuclear power, reflecting the go-ahead for the Hinkley Point C power station.

Members expect to see moderate price rises in all areas of the energy market during 2017, including retail gas and electricity.

Asked their views about price cap proposals outlined in several General Election manifestos, members urged caution. While affordability could be impacted positively, this is counterbalanced by greater, negative impacts on investment, decarbonisation and competition. More than half of respondents felt that a price cap should not be introduced.

 

Low carbon

Energy professionals continue to be sceptical, on the basis of current policies, of the likelihood of the UK meeting its legally binding emissions reduction targets.

Nearly eight out of ten respondents believe the UK will fall short of meeting the fifth carbon budget, which requires emissions to be 57% lower than 1990 levels by 2030. This points to the need for the Government’s Clean Growth Plan to deliver new policy instruments and greater confidence.

The EI separately asked members about President Trump’s decision to pull the U.S. out of the Paris Agreement on climate change. While almost a quarter believe this represents a significant threat to achieving the 2C target, the majority of respondents believe it is surmountable if U.S. action continues at state level and federal support is reinstated under a future administration.

The 2017 Energy Barometer also looks in depth at the future energy system, in particular the need for policy to deliver a flexible, decentralised, integrated system and to reduce emissions from heat through energy efficiency improvements as well as developing low carbon heat sources.

 

Energy and society

Public engagement is identified in successive Energy Barometers as a top challenge for the energy sector. In the 2017 Energy Barometer, price and cost transparency is identified as the area where greatest effort is needed to build public trust.

The transition to a low carbon energy system is the top motivator for those joining the energy industry and they expect decarbonisation to be the biggest change seen over the span of their careers.

The 2017 Energy Barometer survey was conducted in February 2017. The 2017 College of EI members invited to participate consisted of 157 respondents to the 2016 survey and 782 who were participating for the first time. They were drawn from Fellow, Member and Graduate grades of EI membership. A total of 466 College members fully took part in the survey.

For a full copy of The 2017 Energy Barometer from the Energy Institute:

https://knowledge.energyinst.org/__data/assets/pdf_file/0017/304451/Energy-Barometer-2017.pdf

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