Brexit and the energy industry
There isn’t a great deal of information when it comes to Brexit and our energy industry. Though It’s no secret that the UK’s energy supply has become increasingly connected with continental Europe. Therefore, it is a certainty that in any Brexit result, good or bad, cooperation will be key. It is highly likely that due to the UK’s involvement in privatising and deregulating energy markets that the relationship as it stands, is likely to endure. This will be beneficial with the amount of energy we currently import from European countries.
Brexit and the energy industry in the UK
Brexit and the energy industry isn’t a topic that has has much coverage. As a general consensus, the government have realised the benefits of the current relationship with the EU. They are interested in keeping the majority of the current deals in place. They hope to ensure security and maintain electricity prices.
In Great Britain, the government are keen to maintain their access to the IEM, in the hopes that we remain influential in the energy industry. However, a number of positions are incompatible with a fulltime membership with the IEM. Essentially, we would have to comply with relevant European legislation. This meaning the UK may not have a say in the formulation or interpretation of rules. Some immediate implications of the UK’s withdrawal from the EU regards the FCA.
The UK will be expected to cease participation in the Forward Capacity Allocation regulation. The FCA lays down the rules for interconnector capacity. Transmission use fees are expected to be payable on all electricity imports and exports from the UK. Participants in the UK who wish to continue to trade with the EU will need to join the Member State. This will ensure that the UK participant is compliant with the regulation on wholesale energy market integrity and transparency.
So, our reliance on interconnectors will largely rely on whether we keep current legislation and transpose it into UK law. Though, it may have to rely on deals and negotiations post Brexit.
Our climate change policies, how will they be affected?
Thankfully, Brexit is unlikely to change the UK’s climate goals. Saying that, our exit from the EU will come with some issues to settle. Under the Climate Change Act 2008, our emission targets may need to be separated from the EU’s. We would then need to submit our own contribution in respect to climate actions.
In regard to our renewable and low carbon energy policy the government will have the choice of more freedom with designing and supporting renewable energy schemes. This could lead to the government scrapping renewables in favour of low carbon sources or even nuclear. Without EU funding this may be something that they consider, planned projects may see their funding cut as well.
Of course, there is also the fact the UK is still bound to national and international decarbonisation obligations. Depending on whether or not most of the EU law that is transposed onto UK law upon withdrawal our targets for climate change will not be affected. Even if EU law is not transposed the UK has already made obligations that will require climate action. So, the UK will continue to decarbonise and should still be on track for 2050 net-zero.
Gas sources and prices
The gas market is incredibly volatile. So, the risk that our sources of natural gas may change is quite daunting, especially if the price will be affected too. Well, the UK already has mitigation against the security of supply built into the current system. There are three main sources of gas and three sources of liquefied natural gas all brought to the UK from interconnectors.
The main worry comes from supply contracts and the expiration of these contracts. The UK will also need to be wary that tariff network codes do not give rise to complex issues revolving the price at which interconnectors can sell gas their capacity. The tariff network code was introduced in 2017 and it restricts the price in which interconnectors can sell their capacity for.
With Brexit comes the issue of whether or not the interconnectors the UK currently imports from would still be bound to these price restrictions. We will also no longer be part of security mechanisms that help our energy sector greatly like the Early Warning Mechanism and the Gas Advisory Council. That is unless we negotiate keeping our role in these initiatives.
We should hopefully expect that the gas flow should continue as normal irregardless of Brexit.
So, hopefully the energy industry may not be affected by Brexit if the appropriate and sensible steps are taken.
Thanks for taking the time to check out our blog post about Brexit and the energy industry, have a great day!