Everyone is talking about Brexit and wondering how it might affect them. Here’s how we see it at Inspirit Energy…
The first and most widely publicized impact of Brexit was the immediate currency realignment. After rising strongly in the final hours of the campaign when a Remain vote was expected, the ensuing plunge when the Leave vote was indicated was particularly acute. An adjustment of more than 10% in a single day is normally cause for concern, except that in this case nothing has yet changed legally and the changes that will happen are as yet unknown. It is that lack of knowledge which worries investors.
From an Inspirit Energy point of view we have limited currency risk. Currently, all of our input costs are sterling denominated, almost all of our first year sales are expected to be to UK customers and sterling denominated and our supply chain is predominantly UK based. As a result there are no obvious, short-term impacts from this currency realignment and, if anything, we are more insulated from this than other companies in the industry.
Even better, the fall in the value of sterling makes our products more financially attractive abroad in markets such as Europe and North America.
One of the attractions of the EU to microCHP developers, and particularly fuel cell microCHP developers, is the amount of money available from the EU. The EU’s “Horizon 2020” budget for fuel cells of all types was a staggering €1billion. This is partly due to the much higher costs of fuel cells when compared to engine based microCHP products, particularly Stirling engine based products like the Inspirit Charger. Some microCHP companies are heavily reliant on these funds.
Inspirit Energy has never relied on EU funding and hence the removal of this source of funding has no impact on us. Instead Brexit may help to focus more attention on direct UK government support for the microCHP industry, particularly short-term ‘pump-priming’ measures to help the industry get started.
Feed in tariff
One such opportunity to ‘pump-prime’ the microCHP industry is the current feed in tariff consultation. The feed in tariff is a UK government subsidy for renewable and low carbon electricity generation, which came into operation in April 2010. The consultation is happening now in order to comply with EU state aid rules which control how much support the UK can provide to particular industries and technologies with an enforced review every 3 years. Without these state aid rules the consultation itself might not be happening. Given that it is, one way to address the uncertainties around Brexit would be for DECC (the Department of Energy and Climate Change) to make the microCHP feed in tariff more, rather than less, generous.
The transformation of our economy from one reliant almost exclusively on fossil fuels and nuclear power plants to a lower carbon, lower energy, more renewable and more resilient economy has been catalysed by the EU’s environmental legislation. It is ironic given that the previous coalition government was supposed to be the “greenest government ever” and yet it has been the UK government which has dragged its feet.
EU directives around energy efficiency and carbon targets prompted the UK to enshrine its own carbon targets in legislation. Indeed, the UK’s 5th carbon budget was approved by Parliament on 30th June, just one week after Brexit, largely in response to last year’s global climate talks in Paris.
The inclusion of carbon targets in UK legislation means that this is an area which is unlikely to be affected by Brexit. The methods used to achieve our decarbonisation goals may now change or become more flexible but the direction of travel should remain the same.
The Inspirit Charger is extremely efficient at producing heat and power at the point were it is needed, when it is needed. This efficiency reduces energy use and hence energy costs for end users. Indeed the electricity generated is up to four times cheaper than grid electricity.
In addition, the Inspirit Charger’s ‘Sealed for Life’ design means maintenance costs are similar to that for a standard gas boiler, unlike other microCHP products.
The Inspirit Charger works all year round, whatever the weather. If you have a demand for heat, it will also provide you with electricity, reducing your carbon footprint at the same time.
The Inspirit Charger is designed for British homes and businesses and in particular for British heating systems. None of these advantages changes with Brexit.
Inspirit Energy has always been in the position of being able to export worldwide. Brexit has not changed that but is has heightened awareness within government of the need to support export initiatives. We therefore expect to see new initiatives from government to encourage and support technology development companies such as Inspirit Energy in our efforts to access the most attractive export markets.
Regardless of developments around Brexit, keeping a tight control on costs almost always helps to reduce risk in a business. Inspirit Energy has probably the lowest overhead base in the microCHP industry which stands us in great stead to deal with uncertainty and to take advantage of new opportunities as they arise.
There will be winners and losers in Brexit. Inspirit Energy is well placed to take advantage of new opportunities and avoid the new pitfalls.
At Inspirit Energy we’re looking forward to the future, to continuing on our path to the commercialisation of our technology and ready to take advantage of any opportunities which arise from Brexit.