The Impact Of Brexit On UK Renewable Energy Policy: A SWOT Analysis Essay.

Background:

Following Brexit, the UK would be released from its renewable energy targets under the EU Renewable Energy Directive and from EU state aid restrictions, potentially giving the government more freedom both in the design and phasing out of renewable energy support regimes.

Using the SWOT analytical tool, critically analyse the impact of the Brexit referendum on the United Kingdom’s energy policy framework with particular emphasis on the impact of the Brexit on UK renewable energy development.

The major reason for the country for leaving EU was to handle its trade and business activities freely without any restriction resulting in Brexit. The word BREXIT means Britain exit. On 23 June 2015 through the process of EU referendum, 30 million people voted for the cause resulting in the acceptance of Brexit with majority of 59.1% votes. Through his process UK will now work on the renewable energy directives with autonomy. UK used to provide 15% of energy to EU under the campaign RED (renewable energy directives). The union targeted to cut cost and use 20% of renewable energy resources till 2020 for sustainable growth but now due to Brexit there has been a change in the policy framework of EU as well as UK which are further discussed below:

For the purpose of generation and distribution of electricity, UK is regarded as the constitution for the world’s renewable energy power house. Also the country has a strong background to manage the changes of Brexit. Benefit to UK after the phase of Brexit may be that now the country can easily purchase cheaper electricity from the EU. The country is benefitted by the interconnections as they allow them to buy electricity to meet the requirements of the country as there is a deficiency of renewable energy resources (Ebell, & Warren 2016). The interconnectors provide UK an advantage to be connected with the IEM and continue its proactive policies.

Another advantage of UK leaving EU can regarded as now he country can make and amend its own energy policies also the country would ensure flexibility by allowing investment from various sectors.

Also it is assumed that with the coming of Brexit UK would more likely to focus on the flexible investment in diverse technologies by not becoming a part of EU’s Third energy package (Global Counsel 2016). Although there is political instability in the country but it is assumed that it won’t affect the activities led for the favor of renewable energy also the country invested more than 500 pound for the purpose to save the energy and suggest alternatives to introduce new and clean energy (Goddard 2016).

The country now adhere the liberalize techniques which involve refining the energy policy and also continuing the provisions of third energy package. Whereas in case of no- Brexit scenario the country would have been get attracted with high cost energy importer by EU. Also the spare capacity margin is will now become optimum for the country as the country will take initiatives to introduce framework for attainment of alternative method.

Weakness

Various energy policy and climate change initiates were led at EU level which affect UK like;

EU ETS (EU emission trading scheme) helps the countries to overcome the climatic change and drive investment in low carbon technologies but through Brexit now the country can implement its own trading scheme by analyzing the drawbacks and amending them (Pisani-Ferry et, al., 2016).

UK cannot be considered as potentially strong without the support of the European Union, also it can be said that he overall effect of Brexit on the country’s energy policy can be considered as negative.

The union focused on implementation of certain step after a certain period of time which would bring prosperity in the countries but now post Brexit all such effects seems to be far off as due to Brexit UK needs to leave schemes set by EU as well. Some of the schemes are:

The renewable energy directive which was established in year 2009 focus on position and arrangement of renewable energy resources in the EU member states. But now with the discharge of country the aim of UK seems to fall short as the goal can only achieved by the companionship with EU. The IEM (internal energy market) frame was formed to liberalize the regulations that ruled and electricity system in EU. With the exit of Great Britain now it will become difficult for UK to amend and mange policy for the same. As the country is now budding stage therefore it is difficult for them to accomplish the trade of energy without the support of aligning countries (Norton Rose Fulbright 2016).

As the process of Brexit it is clearly known that the country is not in a stable stage to regulate activities on its own. With the Brexit now no country will intervene in the activities of the UK, also it is known that UK require electricity supply and it import other non-renewable resources. Therefore it can be clearly stated that the country has to suffer difficulties in order to survive with the energy and resources they have. As there is political instability in the country therefore it is difficult to invest in the energy sector and implement techniques to achieve the goal on 2020.

The European referendum decided to support the Brexit resulting in emergence of new policies for the trade of renewable energy resources for UK. A new potential model was established for providing a framework to the activities of UK. The model suggested have a view that the schemes of Norway that is EFTA and EEA would not hinder any activities of UK so now the country need not seek any permission or has obligation to be fulfilled resulting in free flow of trade.

Opportunities

Although working alone involves greater degree of uncertainty in the market but it also provides the opportunity to the country to work free without any hindrance by any union or community. Now the country shall handle its trade and make investment according to the reserves of the country and it does not need to lower its trading for other countries of the union. Also the country receives a wide range to make investment as the reserves of UK would have been saved. There would be saving in treasures of the country as the now UK need not to contribute its share in various schemes of EU or budgets.

The major aspect through which a country can change its shape is through becoming independent. UK has a great opportunity to work without any intervention and surveillance of any union. The country can take valid risk and adapt technologies for the purpose of growth (Vehvilainen 2016). In a union it is difficult to collectively initiate a new major change as many countries activities are linked with that so all concerns shall be accepted and then further changes shall be amend. Hence it is a long going process for the union to adapt change. Hence, it is an opportunity for the country to initiate changes speedily and look for the betterment of the country not all other neighboring countries.

UK can maintain liquidity in the countries and provide a flow of trade by producing gas in the country. As domestic production of gas gives the country a competitive advantage and also provide a hub in the LNG market.

As seen above the country receives many benefits with the occurrence of Brexit along with which it also attracts many threats for the country. Like,

The country loses market integration and put itself at a huge risk, as earlier in case of emergency UK used to receive assistance morale and financial support from neighboring countries but due to Brexit the country loses that opportunity (Smith, et, al., 2009). Also due to this action the import cost also increases as the country separates itself from various schemes of the union. The country has already deficiency in its account due to which the GDP of UK is also decreased resulting in devaluation of the currency pound.

Due to new energy policy after the referendum, the investors will demand for higher rate of return for the investment program due to generation of higher risk in the activities of the country. It is noted that the country has not yet attained political stability due to which there is chaos in the activities of the country resulting in reduction of faith on the country. Due to which the country is attracted with higher cost imports in electricity and infrastructure (Vivid Economics 2016). Overall this can be assumed that the country attains higher risk in the energy sector with increased cost in investments programs.

Threats

Market coupling of the country is reduced as the country has parted ways from various schemes working under the observation of union. EU in comparison with UK has more competitiveness and now the country is affected with controversies as well consequential devaluing the country (Nunez-Ferrer, & Rinaldi 2016). It shall be the major concern for the country that in case of unforeseen danger now the country wouldn’t have support of any union which would help UK to overcome the situation. So now all the activities shall be handled by the government of the country only.

Conclusion

Thus it can be predicted that with the process of Brexit, the country has attracted push in investments costs but with minor changes in the policies the resources can be saved. Also there is an advantage to the country of working liberally (Kierzenkowski et, al., 2016). UK can also attract liquidity and efficiency in the market by effectively using its core product that is gas. Intervention of union in the activities of the country is also reduced resulting in independency of the country. Thus in the limelight of these event it can exclaimed that Brexit gives freedom to UK to map its own energy directive principles.  But such impacts cannot be reckoned fully as there are some changes to happen. At the end the 2 years negotiation period will finally decide the stable policy framework for the country.

References

Dhingra, S., Ottaviano, G.I., Sampson, T. & Reenen, J.V., 2016. The consequences of Brexit for UK trade and living standards.

Ebell, M. & Warren, J., 2016. The long-term economic impact of leaving the EU. National Institute Economic Review, 236(1), pp.121-138.

Global Counsel, 2016, UK energy policy and Brexit, viewed on 3 july 2017, from https://www.global-counsel.co.uk/analysis/insight/uk-energy-policy-and-brexit

Goddard, A, 2016, THE IMPACT OF BREXIT ON THE UK ENERGY MARKET, viewed on 3 July 2017, from https://www.addleshawgoddard.com/globalassets/insights/energy/the-impact-of-brexit-on-the-uk-energy-market.pdf

Kierzenkowski, R., Pain, N., Rusticelli, E. & Zwart, S., 2016. The Economic Consequences of Brexit.

Norton Rose Fulbright, 2016, Impact of Brexit on the energy sector, viewed on 3 July 2017, from, https://www.nortonrosefulbright.com/knowledge/publications/136979/impact-of-brexit-on-the-energy-sector

Nunez-Ferrer, J. & Rinaldi, D., 2016. The Impact of Brexit on the EU Budget: A non-catastrophic event.

Pisani-Ferry, J., Röttgen, N., Sapir, A., Tucker, P. & Wolff, G.B., 2016. Europe after Brexit: A proposal for a continental partnership (Vol. 25). Brussels: Bruegel.

Smith, R.D., Keogh-Brown, M.R., Barnett, T. & Tait, J., 2009. The economy-wide impact of pandemic influenza on the UK: a computable general equilibrium modelling experiment. Bmj, 339, p.b4571.

Vehvilainen, M, 2016, Brexit impact on the energy sector, viewed on 3 July 2017, from, https://www.monarchpartnership.co.uk/brexit-impact-smart-energy-guide/

Villanacci, A, 2016, Impact of Brexit on UK Energy Security, viewed on 3 July 2017, from, https://energy.sia-partners.com/impact-brexit-uk-energy-security

Vivid Economics, 2016, viewed on 3 July, 2017, from, https://www.vivideconomics.com/wp-content/uploads/2016/03/VE-note-on-impact-of-Brexit-on-the-UK-energy-system.pdf