Fundamental questions need to be answered on energy policy

24 June 2016

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Tony Ward, EY’s Head of Power & Utilities, comments: “Being an island with limited interconnection to the continent, the UK has out of necessity had to meet its energy needs, from electricity generation through to water distribution, largely from its own UK-based resources and assets. Demand for these services is not likely to change materially, despite the vote to leave the EU, and the UK-based industry will continue to meet that demand.
                                                                        
“However, the UK has become increasingly dependent on the import of fuel and technology to construct and operate assets. If, as expected, sterling declines in the FX markets, the price of these imported resources may rise, increasing the costs to end users of energy in particular.
                        
“The vote to leave the EU will also likely make its impact felt by creating an immediate heightened level of policy and regulatory uncertainty. Whatever Government emerges in the aftermath of the leave vote it will need to clarify its policies with respect to climate change, renewable energy, technology preferences, State Aid and many other matters of direct relevance to the utility industry, and to its investors.
                                                                
“In many respects, the UK has taken a lead in Europe when it comes to renewable and low carbon policies – the question as to whether support for low carbon technologies will be withdrawn, and whether other industries will be favoured, is a fundamental one. How UK governments from now use their freedom from EU policy constraints will be watched closely.”