BREXIT: good news for some 'over regulated' renewables, but development incentives could be lost

This is part of Out-Law's series of news and insights from Pinsent Masons experts on the impact of the UK's EU referendum. Watch our video on the issues facing businesses and sign up to receive our 'What next?' checklist.

However, planning expert Jennifer Ballantyne of Pinsent Masons, the law firm behind Out-Law.com, said that the end of EU-level carbon reduction targets could remove some of the most pressing incentives for the UK government's pursuit of a green energy strategy.

EU laws impose particular requirements on development processes, which add particular constraints and extra costs to new onshore and offshore wind in particular, Ballantyne said. However, it would be both "commercially significant and controversial" should the UK seek to reduce these requirements as laws evolve once the lengthy 'Brexit' process concludes, she said.

"Forward-thinking developers may already reviewing their thinking around areas currently designated or proposed for designation as having EU protection on environmental grounds," Ballantyne said. "The problem is that a number of these areas are also exactly the sort of places where one would want to build onshore or offshore wind farms. Some in the UK have never been convinced by some of the science that underpins those designations."

"On the other hand, there are EU targets for reducing dependency on carbon-based energy. These are legally binding in a way that the likes of the Kyoto and Paris agreements are not, and member states can be fined if they come up short. Currently, a strong case can be made for new developments by reference to those targets. Removing this could remove the incentive for the carbon agenda. The threat of fines certainly helps to focus minds, especially where the government of the day does not accept the economic arguments in favour of leading the green economy," she said.

Last week, the UK government accepted the recommendations of its advisers on the Committee on Climate Change and adopted a fifth carbon budget which targets cutting carbon emissions to 57% of 1990 levels by 2032. The figures in the budget are set to enable the UK to meet the legally-binding carbon reduction target of 80% of 19990 levels by 2015, as set out in the 2008 Climate Change Act; and will require it to reduce emissions including those from power, transport and buildings.

Legal experts at Pinsent Masons have warned public authorities and the companies that they contract with of the importance of continuing to comply with EU state aid and public procurement laws despite of the result of the referendum, pointing out that some restrictions would continue to apply regardless of whichever trading model the UK negotiates with the EU in the future. However, energy and planning law expert Gary McGovern said that the referendum result could create new opportunities to develop the UK-based supply chain.

"All the major kit for renewable infrastructure is currently procured from continental Europe as there is little manufacturing base in the UK," he said. "There could be greater opportunity to stimulate that base through targeted action without fear of triggering state aid rules - however, there would be significant ground to be made up."

"On the other hand, it's striking that much of the current investment and financing for renewables comes from outside the UK, and a significant proportion of the major players in UK renewables are owned by European parents. For subsidiaries of European businesses, or those reliant upon foreign investment, there will now be concern over potential trade barriers which could make the UK a less attractive investment proposition," he said.