The impact of Brexit on the UK energy sector is very likely to be negative, with the energy costs rising to £500 million per year if the UK leaves the European Union, according to the report commissioned by the National Grid.
The report, produced by Vivid Economics, assessed the impact of UK potentially leaving the Internal Energy Market (IEM), and found that it could result in the energy costs rise in the UK up to £500 million per year in the 2020s.
Most of the impacts could be effectively mitigated if the UK is allowed to remain in the IEM, although there would be a loss of influence over policy design, the report states.
Further impacts on the investment climate for energy assets could intensify the impact by up to several hundred millions of pounds and occur even if the UK stays within the IEM.
Additional economy-wide impacts such as a fall in the exchange rate could raise costs to the energy sector further, the report pointed out.
“Our assessment is that higher costs of investment in energy infrastructure is the most significant Brexit risk to the energy sector,” it is stated in the report.
Furthermore, any potential benefits of Brexit, which denominates British European Union (EU) exit referendum, are likely to be limited, given that the UK is committed to decarbonisation and air quality targets equal to or greater than EU requirements, the report states.
Vivid Economics is a London-based strategic economics consultancy involved in the policy-commerce interface and resource and environment-intensive sectors.