A British vote to leave the EU next week would make UK energy infrastructure investment costlier and delay new projects at a time when the country needs to plug a looming electricity supply gap.

Energy has been far from central to debates about Brexit – but the sector would still be impacted by a decision in the June 23 referendum to quit the 28-nation bloc.

After a Brexit vote, all EU laws apply in Britain until two years after London starts the process to leave. Then none would apply but Britain could try to stay part of some frameworks through negotiations, a process that could take years.

Uncertainty about the type of relationship Britain would have with the EU after Brexit would make energy investors demand higher returns for the risk of less favourable conditions.

Oil and gas majors BP and Shell are among several energy companies that say leaving the EU would affect them and the sector negatively.

“I can’t see any upside for the energy sector of the UK coming out of the EU. The risk premium going up will increase the cost of capital,” Ian Simm, chief executive of UK-based Impax Asset Management, said.

“We have mostly run our power assets down over the past 25 years. Therefore, we do need investors to be confident enough to put their hands in their pockets and commit to the next wave of power plants,” he added.

UK-based consultancy Vivid Economics has estimated the cost of exclusion from the internal energy market, excluding impacts on investment, could be up to £500 million a year by the early 2020s.

“The scale of planned infrastructure investment in the electricity sector over the next decade means that even small increases in the cost of financing could have large consequences for total investment costs,” it said in a report. “Further upwards pressure on costs would result from the likely devaluation of the pound, given the role imported goods and services play in UK energy supply.”

According to a poll this month, the British pound would sink nine per cent against the dollar after Brexit.

The country faces serious energy supply difficulties over the next few years as coal plants have to close by 2025, the nuclear fleet is ageing and weak economic conditions curb investment in new gas-fired power plants.

Renewable energy is growing, but more interconnections and energy storage are needed. The British government has estimated that the required energy infrastructure will cost £275 billion by 2020-2021.

French utility EDF’s plan to build two huge nuclear reactors at Hinkley Point in Britain would help plug the supply gap. The company’s chief executive said earlier this year that Brexit would not change its plans, but it has not yet made a final investment decision.

Investment in interconnectors is also important for Britain. UK wholesale power prices are higher than the EU average, partly because interconnections with other countries are able only to supply around six per cent of peak electricity demand. However, efforts to link the UK’s electricity grid with other European power networks could be set back due to Brexit.

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