Brexit fallout: Offshore wind threatened Hinkley Point 'litmus test'

The British offshore wind industry, already bruised by subsidy changes, faces uncertainty after Britain voted to leave the European Union, with investors worried about future government incentives, exchange rates and export duties.

Portugal's Energias de Portugal-EDP said it could delay its Moray Firth offshore wind energy project in Scotland and German engineering giant Siemens said it was reconsidering plans for an expansion of its planned manufacturing plant in the port of Hull in north east England.

"I believe we are looking at a 2-3 year hiatus in those large-scale energy projects where financing would be international," said Richard Slark, director at energy consultancy Poyry.

Britain is the world's biggest offshore wind market, expected to be worth £20bn from 2010-2020 according to renewable energy industry body RenewableUK.

It has more than 5 gigawatts (GW) of capacity which the government wants to double by 2020 in order to meet climate change targets for lower carbon emissions.

The result of the vote has made it more difficult for offshore wind investors, who are mainly international, to predict foreign exchange rates, an important factor as many of them buy equipment in euros.

The pound fell to the lowest level in over two years against the euro after the vote.

RWE Innogy, one of the partners in the Forewind consortium which is building up to 4.8 GW of new capacity, said a weak pound would mean its revenue, which is calculated in euros, could fall.

It is also unclear what kind of access Britain will have to European markets once negotiations on an exit have been completed, a concern for companies building turbines for export.

Offshore wind farm developers are still reliant on government subsidies to make projects economically viable as installing turbines hundreds of kilometres off the coast is expensive.

In October, electricity firm Statkraft said it believed robust government support for offshore wind in the short-term could make the technology viable without subsidies in a decade.

For a British contract, offshore wind builders have to compete in an auction with other types of renewable energy technology suppliers, such as geothermal plants or projects generating power from waves and tidal streams.

With uncertainty about Britain's political leadership following the resignation of Prime Minister David Cameron and warning signs from the finance minister about rising taxes and possible further austerity measures, investors are concerned the next auction, initially scheduled for the end of the year, will be delayed.

British energy minister Andrea Leadsom said this week it was not possible to say when it would be carried out.

EDP Chief Executive Antonio Mexia said that a delay to the auction would have a knock-on effect for its Scottish project.

Other offshore wind investors, including Britain's SSE and Sweden's Vattenfall, have said the vote had increased uncertainty and therefore investment risks.

Meanwhile unions have stepped up their support for the delayed Hinkley Point nuclear power station, saying that confirming the financial go-ahead will be the first big ‘litmus test’ for infrastructure projects following the EU referendum result.

A government adviser recently admitted to The Times that the project could become a casualty of Brexit as French energy company EDF would likely be unwilling to make the vast investment needed with the uncertainty caused by the leave vote.

The GMB, Unite, Ucatt, and Prospect unions have written to the chief executive of EDF Energy, Vincent de Rivaz, saying it is ‘vital’ that a final investment decision is made.

The letter said: "UK trade unions are 100 per cent in support of Hinkley Point C and believe that it is vital to make a final investment decision in a timely fashion soon after the consultation process (between EDF and the French unions) is completed (on 4 July).

"Nuclear new build is already behind the curve. We cannot afford further delay and it is vital for EDF to make a final investment decision now."

The unions said the £18bn project, which would generate seven per cent of UK electricity demand, was vital in providing thousands of jobs and ‘keeping the lights on’ in the years ahead.

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