Offshore wind could secure less capacity in the upcoming Contracts for Difference round if the UK leaves the European Union in a no-deal scenario according to Wood Mackenzie Power & Renewables.
In its ‘Potential impact of hard Brexit on the UK’s offshore wind industry’ report, the analyst said the potential 2.7% World Trade Organisation import tariffs on the non-UK supply chain would increase construction costs.
Approximately 68% of the offshore wind supply chain is sourced currently from non-UK based companies.
Hard Brexit would also weaken the initial evaluation of the project financial performance in the base case, it added.
The offshore industry also faces a “significant degree of uncertainty” over labour, financial and legal perspectives until a new trading agreement is reached with the EU.
“Combined with the given strike price and the project delivery window, awarded capacity supported through the upcoming auction could drop,” the report stated.
The potential awarded capacity reduction in CfD3 is not quantified. UK energy department BEIS has capped overall procurement from the auction to 6GW.
WoodMac said hard Brexit would have a less severe impact on the offshore wind power industry than other industry sectors.
“More than 19GW of new capacity is forecast by 2028, we expect a hard Brexit to have limited impact on this development potential.”
It added: “(The industry) is expected to see a higher degree of clarity on hard Brexit by the commencement of the next CfD allocation round (in 2021).”