OREANDA-NEWS. Investors seeking to develop new power infrastructure in the UK face increasing uncertainty after the country voted to leave the EU in a referendum held yesterday. The prospect of an uncertain investment environment comes at a time when the government is trying to replace the country's ageing nuclear and coal-fired power plants.

The heightened uncertainty and risk for developers over the coming years as the UK negotiates its exit from the EU is likely to mean that investors will seek higher returns for their projects before committing investment, a report commissioned by transmission system operator National Grid in the lead-up to the vote said.

The UK government has pledged to close all of its remaining unabated coal-fired plants by 2025 and replace them with new gas-fired and nuclear plants.

The pound had dropped to its lowest level in more than 30 years this morning, with a weaker pound not only effectively lifting the relative cost of importing power, gas and coal, but also lifting the cost of imports for the materials and equipment required to build new energy infrastructure. Planned new plant projects may now face final investment decision delays, which could mean that remaining coal-fired plants are required to remain on line to ensure security of supply.

The owners of the country's coal-fired plants had been required to make a decision by 2020 as to whether they wish to invest in the required emissions-reduction technology for compliance with the EU's industrial emissions directive (IED) or face closure. The UK's vote to leave the EU may allow such facilities to evade this deadline and continue operating into the mid-2020s, but the country would have to remove the legislation from its national law for this to happen.

The UK is also likely to have to re-negotiate its membership of the European internal energy market (IEM) during the planned two-year negotiating period for securing its exit if it wishes to remain a part of it, and retain the associated benefits of power market coupling initiatives and cross-border market balancing.

EU membership is not mandatory for involvement in the IEM, with Norway having joined despite not being a member of the EU. But even if the UK did re-join the IEM, energy minister Amber Rudd — who campaigned to remain in the EU — has previously said the country's influence on rule changes and regulation is likely to decrease.

Membership of the IEM is likely to affect plans to increase the UK's interconnector capacity over the coming years, with new interconnections with Norway, Denmark, Belgium, France and Ireland planned.

UK utility SSE said today that the referendum outcome presents no immediate risk to its planned investments, but urged the government to outline its plans for the country's involvement in the IEM, in order to avoid a prolonged period of legislative and regulatory uncertainty.

The UK's vote to leave the EU also raises questions as to the future operation of the Irish single electricity market model, with the Republic of Ireland and Northern Ireland power markets currently conjoined independent of Great Britain. Northern Ireland will leave the EU as part of the UK.

But a UK exit from the EU may allow the UK to alter the criteria of its capacity market, which is currently technology-neutral in line with EU laws on competition.