The impact of Brexit on UK energy prices
A question we are often asked is what will be the impact of Brexit on my energy bills? The answer is quite simple not much is likely to change. However, there are some short term and long term considerations.
Short term
We may see some increases in commodity prices but these are more likely to be due to the £/ relationship. As uncertainty over Brexit had already been factored into the forward curve, no price hikes are anticipated.
Long term
This is more complicated and therefore difficult to predict. The UK and EU are interdependent and unlikely to be decoupled, however being outside the EU means the UK will have little influence over formulation of network rules.
In terms of cost, the new governments position on renewable energy and the removal of EU funding for low carbon generation will have an impact. The shift from coal to renewables has been conducted almost irrespective of the financial implications but could be reversed by a new regime. In the opposite direction, although EU money will not be removed until Article 50 is sanctioned, it is unlikely the UK will receive the full budget prior to Brexit, or have access to European Investment Bank loans.
As for new nuclear energy, this again will be subject to the new chancellors standpoint which may differ from his predecessor who was a supporter of the Hinckley Point and Bradwell projects.
Conclusion
Oil and gas will continue to be traded as they are now and priced according to global market conditions. Existing gas import infrastructure will ensure supply
and there is scope for increased LNG deliveries. The UKs energy mix may shift and this will have an impact for investors, an impact which will be passed on to end users. Environmental legislation was spearheaded by the UK therefore Brexit will have little or no effect on these issues.