UK Solar Industry Split on How a British Exit From the EU Would Impact Business

The U.K. solar industry faces an uncertain future as Britons prepare to hold a referendum on EU membership this month. Current polls put the outcome as being too close to call, and growing fears of a British exit, or "Brexit," have rocked the pound.

The prospect of relinquishing EU membership has also spooked renewable energy bodies worried about the impact it could have on the U.K.’s regulatory environment.

“The EU’s renewable energy targets have provided a stable backbone to national policy and encouraged a level playing field in terms of regulatory support across Europe,” said Olivia Hall, director of the British Photovoltaic Association.

“This has provided the launch pad for local solar companies to grow into multinational enterprises and our members to succeed in international markets.”

The free movement of talent, know-how and technology across the European Union “has driven costs down and efficiencies up, all to the benefit of consumers,” she said.

But unlike issues such as immigration or the balance of payments, which have polarized public sentiment in the run-up to the referendum, the risks involved in leaving Europe are highly nuanced when it comes to the PV sector.

For example, said Hall, while “the uncertainty around Brexit is arguably making investors nervous in the short term, given the U.K.’s own ambitious renewable energy targets and long lead time on project development, there may be no immediate impact on sector growth.”

And on some counts a split from the EU might actually be beneficial to U.K. solar, said Alistair Marsden, commercial director for renewable energy service provider Dulas. “It’s all generally around the regulation that the European Union has put in,” he said.

For example, a Brexit would allow the U.K. to avoid having to charge an EU-mandated minimum import price (MIP) on non-European solar panels. The MIP is designed to protect European PV manufacturers.

But the U.K. has no domestic solar manufacturing to speak of, so the MIP simply pushes up the price of British projects with no discernable benefit in return. Despite being branded as anti-renewables, the U.K. government fought the latest extension to the MIP, Marsden noted.

“The hope is that if Brexit did happen and we did leave, the minimum import price could potentially go,” he said. “On megawatt projects, that accounts to £100,000 to £120,000 (U.S. $145,000 to $175,000) per project. 

This is significant, said Marsden, because current U.K. government policy will block further utility-scale solar until 2019.

“If you accept that our government is not going to support large-scale, grid-connected, ground-mounted projects, and the business for solar is in private PPAs [power-purchase agreements], then government policy doesn’t matter; it’s actually the cost of the project,” said Marsden.

Taking out the MIP would help U.K. solar projects look a lot more attractive to offtakers, financiers and investors, he said. “We’re being damaged by having that.”

More generally, according to Marsden, MIPs reduce the total pot of cash going to PV manufacturers, which in turn stifles their ability to invest in innovation that can help cut costs and improve product quality.

“The minimum import price is limiting the speed at which the industry can progress and the quality of the panels can increase,” he said.

Then there is the issue of renewable energy targets. The "stay" camp worries that a Brexit would free the U.K. from its EU-agreed obligations. But these only apply up until 2020. Beyond that, the U.K. already has its own targets, which are more ambitious than Europe’s.

The Brexit is not a clear-cut argument for U.K. solar companies.

Dulas’ stated position on the referendum is that it would be better to stay in Europe. But this is based mostly on the impact on other parts of its business, such as wind energy, as well as a general aversion to risk.

While other solar companies might take the opposite view, the fact that many U.K. PV players have operations across Europe could shift their stance against the Brexit.

“In the longer term, it could be dangerous to turn our back on the opportunities and stability provided from being part of a European renewables sector as global markets become closer and more competitive," said Hall.