Following on from my colleague Fionn O’Raghallaigh’s excellent blog post on Brexit and financial regulation, I find myself sitting at work two Tuesdays after the Monday after the Friday before.
As editor of a power market publication, I can often find myself reading or writing about wind power, but this time it is about wind and power. Because winds of change are blowing through a political power struggle in the wake of the UK’s shock vote to leave the EU, harder than ever before, harder than anyone ever expected them to, and the dust that has been whipped up will ultimately take years to settle.
One week on from the vote, the sheer scale of the uncertainty that has gripped markets, the economy, indeed the whole country, has barely even begun to emerge.
Now turn the clock back seven years.
This is roughly when I began to write about the European energy industry. Back then the figure of £200bn by 2020, rising to £330bn by 2030, was routinely bandied around by industry experts as the total investment the UK required to ensure the maintenance of its energy supplies.
Fast-forward to 2016, and we can say with certainty that a sizable chunk of that investment will already have been delivered, with more on the way. A 2014 government document put the total investment “in the pipeline” – no pun intended – at a nice round £200bn. In fact £45bn, it stated, was invested in power generation and electricity network development between 2010-13 alone.
So if we assume a reasonably steady flow of project development since then, we could put the investment figure to date at around £90bn and counting. Seeing as we are a little over half-way through the decade, that’s not a bad push towards the £200bn total.
But now comes the tricky bit.
Many of those infrastructure projects in the pipeline will indeed be delivered because final investment decisions will already have been made. But plans for others – the £21bn Hinkley Point nuclear plant, expected online in 2026 springs to mind – will now surely be revisited in the context of post-Brexit Britain.
And all of this is to come, as has been widely reported, with the UK facing a series of winters where its electricity supply is expected to be tighter than it has been in years.
But energy is a long game. In post-Brexit Britain, the issue that the government, regulator and grid operator now face together is not so much one of what will happen in winter 2016, 2017 or 2018, but what will happen in winter 2026, 2027 and 2028.
It takes a long time to build a power plant, and the energy sector operates on the basis of time horizons measured in decades, not years.
A good friend of mine, long employed at the foreign office and the kind of man who knows this stuff, says the UK must bed itself in for a long Brexit negotiation – up to a decade or longer in some areas – which he says is “only appropriate given we’re undoing 42 years of development”.
I agree with him. And even then the shape of new Britain will have to be put to the people to ratify, he says, in which case we could yet see the whole package blown apart, carried away by the remnants of those same winds that whipped up the Brexit dust storm in the first place.
All of this is going to force a major hiatus in energy infrastructure investment. This is unavoidable and something the UK must prepare for. The investment that is withheld today, and over the coming years of Brexit negotiations, will prevent plants from being built that would otherwise have started producing energy in ten years time and, by then, I would wager the warnings over tight power supply will not have gone away.
So the dust has not even began to settle on Brexit yet. And as dust goes, this is a storm. A Phoenix, Arizona-scale dust storm that will bellow and blow for years to come. To ensure secure energy supplies, the UK will need to keep its eye on the ball throughout, not just until the Brexit negotiations are complete – however long that may take – but for a long time thereafter.
We are about to find out just how long a game energy really is.