Frontier and LCP publish first of two briefings on the effects of Brexit on the UK power market

Frontier and LCP publish first of two briefings on the effects of Brexit on the UK power market

Frontier (Europe) and Lane Clark & Peacock (LCP) today published part one of a two-part briefing on the implications of Brexit for the UK energy sector.

The first part of the briefing examines areas most likely to be affected by the referendum vote: customer demand, commodity prices, and investment in power stations and interconnectors. The briefing discusses two credible scenarios for the post-Brexit world: “Uncertainty and status quo” and “Uncertainty and less favourable trade”. For each, we consider what they might mean for electricity market outcomes.

The paper envisages:

  • A reduction in electricity demand as a result of macroeconomic impacts, which could be one-off or could, in a less favourable trade scenario, be ongoing;
  • An increase in fuel prices as a result of foreign exchange movements, though perhaps a limited impact on carbon prices;
  • Renewable build which falls short of ambitious plans, higher prices to build new thermal power stations (particularly in the short-term) reflecting greater investor uncertainty, and further delay to Hinkley C; and
  • Delays to new interconnection projects, and perhaps fewer such projects in a less favourable trade scenario

Part Two of this briefing, to be published shortly, will evaluate these impacts in more detail.

Frontier (Europe) regularly advises public and private sector organisations on issues relating to renewables support schemes and electricity market design across Europe.

For more information, please contact Saskia Nett at [email protected], or call +44 (0)20 7031 7000.

 

The effects of Brexit on the UK power market – Part One