Two weeks into the Brexit referendum the future of the UK’s solar sector is still uncertain. As experts predict, the short- and long-term effects are most likely to be negative.

It’s been two weeks since the majority of the British people voted in a historic referendum to leave the EU. The decision shook Europeans, their politicians and business makers, to the core. Even now, it is still not certain what Brexit will mean for the UK’s and even the EU’s renewable energy sector. So far, many experts predict it will most likely have a negative impact on the future of solar, wind and hydropower in the UK.

Short- and long-term effects of Brexit

For Frank Niendorf, General Manager of Jinko Solar, and his team the Brexit came as quite a shock when a significant PV module order volume from the UK evaporated on the morning of the referendum.

Discussing the impact the Brexit will have on the solar industry, Niendorf sees short- and long-term effects ahead. In short term, due to the collapse of the British pound exchange rate many scheduled PV projects are no longer economically viable. This becomes clear from the fact that large parts of the investment cost (modules or inverters) is based on US Dollars or Euro rates. It has already happened that cash flows have become negative for some projects. „Some of our customers who have not hedged the currency before the Brexit decision or who have projects with too tight IRR calculation will have to write off the development activities and lose a fortune”, Niendorf told PV Europe.

Of course, this situation also has a definite long-term negative effect for the industry. As Niendorf predicts, investors will be driven away from the UK solar market by this uncertainty. They will reallocate their capital in continental Europe or outside of Europe where the environment for investing is stable.

Will the UK stick to EU renewable energy policy?

However, what concerns Niendorf and other renewable energy experts most is the question whether the UK will continue to abide by the EU Renewable Energy Directives. Without the EU’s renewable energy policy the British government is freed from its obligation to meet the renewable energy targets. It might even decide to return to fossil fuels such as coal or nuclear.

One advantage that the Brexit might bring is the removal of duties to solar PV panels imported in the country from outside the EU such as cheaper Chinese panels. This might give the UK solar sector a boost.

At the same time, energy markets in Europe will move in the opposite direction than the UK. They will build towards an internal energy market. They will decentralize their systems and rely on each other to obtain higher penetration of renewable energies and a stable grid leaving the UK to its own fate.

Sources:

PV Europe, PV Magazine