UK: What would an EU exit mean for renewables?

THE UK's relationship with the European Union (EU) has been back in the news again. With so much of Westminster's low carbon energy ambition originating in the corridors of Brussels, what is the risk to the burgeoning renewables sector of a UK exit from the EU?

A parting of ways for the UK and EU: what could it mean for the renewables industry?
A parting of ways for the UK and EU: what could it mean for the renewables industry?

Note: this article first appeared in Renewable Energy Focus March/April 2013. Click here for a free signup.

In January, after months of barracking from his Parliamentary back benchers, UK Prime Minister David Cameron finally made the speech so anticipated by the British media, and pledged the British people an “in or out” referendum on the country's membership of the European Union (EU) by 2017.

For the UK's burgeoning renewables industry, an imminent EU exit could be construed as highly alarming. The UK's renewable energy target – to deliver 15% of its energy from renewables by 2020 – was set under the scope of the EU's Renewable Energy Directive, while its carbon emissions reduction programme also originated in Brussels.

Indeed, the need to meet binding EU targets has been behind almost all the policy action to help renewable energy blossom in the UK, from the Renewables Obligation, to the feed-in tariff, to the Green Deal – all the measures which the industry campaigned so hard for in order to kick-start investment.

An independent world

The question is, would the UK abandon its renewables ambition in the event that the “shackles” of European targets were lifted, and would it matter?

“It's a huge risk,” says Gaynor Hartnell, chief executive of the Renewable Energy Association (REA). “Europe has been a big driver in many of our environmental targets but particularly this renewables target, and a UK exit would diminish the commitment to reaching the targets for the targets' own sake.”

However, according to Ben Caldecott, head of policy at Climate Change Capital, the effects on the renewables sector of a UK exit from the EU would be minimal.

“If there were any implications for the sector, it would be medium to long term,” he says. “The political fundamentals are such that the UK will pursue and develop climate change and renewable energy policy independently of European targets and the European commission.”

Certainly, the UK has the most ambitious carbon targets of any European nation, and it is the only country to have enshrined them into its own statutes. The Climate Change Act, initiated by Europe's own commitment to reduce its carbon emissions by 20% by 2020, commits the UK to cutting its emissions by 80% by 2050. Meantime, now there are also discussions on the table to use the Energy Bill currently passing through Parliament to commit the UK to decarbonising the power sector by 2030.

Cross-party support

However whether the UK can keep up the policy momentum on its own remains to be seen. The biggest question mark hangs over the stability of the political consensus that exists at the moment on both carbon emissions and renewables.

So far, both matters enjoy broad cross-party support, yet there are signs that this may be under threat. Backbenchers in David Cameron's Conservative Party have already rebelled against onshore wind, on the grounds that they are too heavily subsidised – a rallying call that appears to have been taken up by Cameron's latest minister in the Department of Energy and Climate Change (DECC). A highly publicised row between DECC and the Treasury over the respective provisions for renewables, nuclear and gas in Energy Bill showed further discord on how far the government should support renewable energy.

Meanwhile the UK Independence Party (UKIP), an offshoot of the Conservative Party which uses its opposition to EU membership as a campaign platform, is now also joining the fray on an climate scepticism (and anti-renewables subsidy) ticket. It is no state secret that Cameron agreed to pledge the referendum on Europe in order to placate the more right wing voters and members of his party – both of which tend to fall simultaneously into the Eurosceptic and climate sceptic camps – and prevent UKIP from shaving off too much of the Tories' share of the vote.

With the European referendum pledged, it is not yet clear how far Cameron is prepared to go to placate the more extreme wing of his party on renewables. However a statement by the Prime Minister in February that he wants to revisit some of Europe's environmental regulations – which he said had “gone too far” – sounded a warning note.

Caldecott is sure the political consensus will remain in place. “All the major parties are signed up to these commitments despite the fact there's been a bit of grumbling on the Tory right about it,” he says. “The fundamentals in the UK for action on these issues, and for creating markets to support these investments, is very strong indeed.”

DECC itself remains fairly prim about the possibility of a European exit, and won't be drawn on an exit scenario. “The UK government is committed to meeting its obligations under the Renewable Energy Directive,” a spokesman says. “The obligations set out in the Climate Change Act are enshrined in UK law. We are not undertaking analysis of the impact of leaving the European Union on our policies.”

UK exit - does it matter?