From the many polls taken before the referendum, including our own Energy Brexit panel, it was clear that the majority of energy industry were in favour of remaining in EU. The British public disagreed. So what happens now?
Although the result of the referendum is technically not binding on the Government, it is politically difficult to ignore. What is binding is that Cameron's "settlement" that he negotiated with the EU now falls away; it was conditional on a vote to remain in the EU. So there is no going back. However, could it be EU lite as some people are already saying, given the large vote to Remain?
Going forward, we now have to work out what our relationship with the EU will be. We have two years to do this, under the terms of Article 50 of the EU Treaty. Whether we will get an extension is unclear as it depends on all the other Member States agreeing to one. They will only do so if it is in their best interests.
Whatever happens, it will not mean an end to energy trading with Europe. Yes, we are an island but we are increasingly interconnected with mainland Europe's power network. We still need to trade energy with Europe and are likely to remain part of the Internal Energy Market, whatever happens. As a former CEO of a 'big Six' energy company, and now an advisor to the government on energy policy, said in our recent Energy Brexit event, "the energy is going to flow from Europe to us … whether we are in or out, because it makes economic sense. There will be some uncertainty, but the UK is too big a market to ignore."
In the short to medium term, a Brexit will mean even more uncertainty over energy policy as everyone's attention is likely to be diverted to the withdrawal/renegotiation process and not concentrating on what our own energy policies should be. Vast swathes of our energy regulation, from renewables targets to common rules on the liberalisation of electricity and gas markets ("IME") to state aid requirements are based upon the directly effective EU legislation and/or the implementation of EU Directives by way of national legislation and industry codes and licences. To make sense of this complex mesh of legislation and rules in a Brexit world will take a huge amount of thought and head scratching, and it would be premature to even begin to analyse this at this early juncture.
But this is a chance to shape our own energy policy, in the UK's best interests rather than being dictated by European targets and Member States' conflicting priorities (such as Poland's reliance on coal as protection against the removal of Russian gas supplies versus Germany's Energiewende). It may not be the climate apocalypse some have feared – we still have the Climate Change Act which is more stringent than any EU measures and does not stem from EU law. It could also be good news for shale gas given the EU's anti-fracking stance. Finally, it could eventually mean that the state aid rules will not apply to the UK, giving us more freedom to invest public money in low carbon energy projects that would not otherwise get off the ground.
Head of IPE and Co-head of Energy and Utilities
Partner, Construction and Engineering Disputes Leeds, UKView profile