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How will the EU referendum affect the energy industry?

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With just 14 days until D-day, the uncertainty around the EU referendum is becoming ever more apparent. The lines are certainly becoming more blurred; recent polls show the EU referendum divide is volatile, yet extremely close, with a recent YouGov poll finding 44% in favour of remaining in the EU and 40% in favour of leaving.

But why is the EU referendum happening in the first instance?

Well, it is essentially David Cameron’s way of keeping his promise, arguing that the UK has not had a say since 1975. The UK will be given the opportunity to decide whether to remain in the European Union; 28 European countries bound together through trading, economy and politics, or to become an independent nation.

Interestingly, the European Union actually started out of energy integration, with the European Coal and Steel Community acting as the forerunner of the EU. The idea was to combine coal and steel industries across Europe and remove the barriers that stopped them from trading with each other in order to exploit the opportunity for full energy cooperation.

Brexit would not only affect the UK’s economy, but Europe as a whole. So if the UK is set for major changes over the coming couple of years, it poses the question; what will become of the energy sector should the UK vote to leave to EU on the 23rd June?

Well, Energy and Climate Change Secretary, Amber Rudd, has made no secret of supporting stay campaigners across the UK. She warned that leaving could undermine energy security, as well as potentially increasing UK energy costs by up to £500million a year. She’s not alone. While the UK’s biggest energy companies have generally aired on the side of caution, and kept schtum on the argument, SSE has suggested an increased risk to its business and consumers when regarding energy security should the votes favour Brexit.

In addition to this, there have been contradictory theories over the future of the UK’s gas sourcing security. Britain has a number of gas and electricity interconnectors like IFA (between England and France,) and while they are set on developing more, it is said that the effect of Brexit will be likely to have an impact on both cost and energy security due to a shift in regulations.

Others believe that voting to leave in the EU referendum would have little impact on the current UK energy industry as the UK’s gas sourcing system mitigates against security of supply risks built into the system.

Ultimately, it is suggested that the UK will relinquish the benefits from EU market integration initiatives in the long term should they remain in the EU. After all, energy security is said to only be obtained and effective through sharing strengths.

In contrast, Brexit campaigners believe that leaving the EU will result in lower energy prices based on the assumption that the UK will lower renewable targets and step up investment in fossil fuels. However, should Britain vote to leave the EU after the EU referendum, it is predicted to make no difference to energy policy in the long run, as Britain’s Climate Change Act poses even harsher requirements for cutting carbon emissions; that is 80% on 1990 levels by 2050. Natural gas is also less likely to face major cost implications due to Brexit.

There are, of course, obvious concerns around UK renewable energy projects that have, or are planning to receive funding from EU organisations. Time constraints would be the saviour of many of these projects as those needed to meet renewable energy targets will have already been granted planning permission and subsidy contracts.

Nonetheless, it is thought that leaving the EU will give the UK room to invest in more nuclear and gas projects. Leave campaigners believe freedom from EU regulations mean that there would be a jobs boom. It’s argued that, “the UK labour market is incredibly dynamic, and would adapt quickly to changed relationships with the EU.” Investment into nuclear and gas would ultimately create more roles within the UK, alongside the predicted jobs boom derived from fracking.

Brexit doesn’t necessarily mean that we will be bidding farewell to the EU; the likes of Norway and Iceland participate in the EU Emissions Trading Scheme. If the UK are able to take this route, they will still be included in the EU’s energy processes.

As the future of the UK energy industry hangs in the balance, we will be awaiting the outcome in anticipation as we’re sure you will be too. In the meantime, take a look at our latest roles and fulfil your potential.

roles jdr