The fate of U.K. renewable energy exports to Europe hangs in the balance after policymakers failed to achieve a breakthrough in Brexit talks over the weekend.
Last month, the British government admitted renewable energy exports to Europe may be compromised if the U.K. exits the European Union without a deal next March. That scenario now seems increasingly likely after talks stalled Sunday, ahead of a European Union summit this week.
The impasse means U.K.-based renewable energy exporters may find their renewable energy guarantees of origin are no longer recognized in the EU, according to a U.K. Department for Business, Energy & Industrial Strategy (BEIS) guidance note last month.
A no-deal on Brexit “will mean that existing contracts with EU countries’ electricity suppliers or traders may be compromised if the contract terms require the transfer of a Renewable Energy Guarantee of Origin recognized by the EU," the note read.
The U.K. government has been forced to issue no-deal guidance notes for a range of industries. The country voted to leave the EU in June 2016 and its severance from the Union is scheduled for midnight, central European time, on March 29, 2019.
The U.K. government led by Prime Minister Theresa May had confidently predicted it would be able to strike a mutually acceptable divorce deal with the EU well ahead of the March departure.
But with barely six months to go, what happens on the Irish border has become a major sticking point for talks. The U.K. and the EU are both keen to avoid the need for a so-called hard border, with customs checks and barriers, between Northern Ireland and the Republic.
There are discrepancies over what would happen if there is no trade agreement between the U.K. and the EU after the disconnection, however. May’s government has suggested that, for trade purposes, the whole of the U.K. could remain within the EU for a limited period of time, a proposal which European negotiators are not happy with.
Brussels instead would prefer for there to be border checks between Northern Ireland and Great Britain.
However, this option is off limits for May’s government as it would undermine the U.K.’s national sovereignty and, crucially, alienate Northern Ireland’s Democratic Unionist Party, which May depends on for her parliamentary majority.
Time is now running out to seek a compromise. Last weekend’s talks were seen as crucial in securing a deal with enough time for lawmakers to push it through on both sides of the English Channel.
The talks were due to precede a meeting in November to ratify the withdrawal deal and begin working out the details of future trade relations. Now it is not even clear if the November meeting will go ahead.
Based on the BEIS guidance, a no-deal scenario would mean renewable energy imports to the U.K. would continue to be recognized as they have been until now, but there is no guarantee that such a treatment would be reciprocated by the EU.
“At the highest level, it’s concerning that these schemes may have to change in the event of a no-deal,” said Michael Dodd, market area manager for the U.K. and Ireland at DNV GL, the global quality assurance and risk management company.
“It’s positive that the U.K. will recognize European certificates. The one-sided nature of the arrangement, however, is a concern for U.K.-based generation and U.K.-based developers," he added.
If there is no longer a viable market for U.K.-generated certificates within Europe, he said, “that’s naturally going to reduce the opportunities to sell and market the power that both existing and prospective generation will generate.”
The BEIS proposals, Dodd noted, are light on detail. A BEIS spokesperson told GTM that the U.K. government still expected to strike a deal, but would be publishing a no-deal technical notice “in the near future.”
After Sunday's negotiations faltered, U.K. renewable energy exporters will surely be looking forward to it with renewed interest.