P. higher bills, uncertainty of supply, obstruction of the energy transition. Brexit, due to take place on Friday, January 31st, could cause disruption to the UK energy market.
The UK is heavily dependent on the EU for its electricity supply. Its own production is down 1.6% in 2018 according to the latest available statistics, mainly due to the gradual shutdown of coal-fired plants.
It has not yet been fully offset by the rise of wind energy production. As a result, imports of electricity and gas mainly from France, the Netherlands and Ireland have increased and it accounts for nearly 40% of the country’s energy consumption.
There is no doubt that the imminent exit from the EU and the Single Electricity Market poses risks for the already fragile electricity grid. The UK experienced a giant power grid crash in August.
It is not yet clear whether the energy sector will be part of the negotiations with Brussels this year, and furthermore the delays in the sector may be delayed.
The British authorities say that without further delay, alternative options must be devised to secure electricity supply.
As in other sectors, including finance, it will be necessary to ensure an equivalent regulation in order to be able to export or import electricity while respecting the carbon rules so that cleaner countries not to put them at a disadvantage, notes the France Press, quoted by BTA.
British energy regulator OfGem claims that even with the failure of trade negotiations, there will be no “interruptions in electricity and gas flows”.
However, if no agreement is reached after trade negotiations are completed at the end of 2020, the EU may decide to favor its members in peak demand during hot or cold weather, notes Weijie Mack, project manager at Aurora, answering an AFP question.
Uncertainty about equivalent capacity, likelihood of reintroduction of quotas or tariffs in a trade failure scenario: exchanging electricity with Europe could be more expensive and have “higher bills for consumers”, explains Joseph AFP Dutton, from the E3G Analysis Center.
The exchange of electricity between the EU and the UK is, in practice, determined by a system of tenders and it cannot be ruled out that there will be a certain preference for Member States in the future. Without neglecting the impact of a new bout of British Pound weakness on the bills. Through this prism, the Eurelectric Green Energy Advocacy Association has identified Brexit as a “losing loser” situation for both the UK and the EU.
Obstructed energy transition
Due to uncertainty about future equivalent capacity and the trans-European exchange, a number of interconnectors projects across the English Channel or across the North Sea have been called into question, most notably from France (Aquind and Gridlink).
These links are crucial to the UK’s energy security: “they supply less than 10% of electricity, but they balance supply and demand,” notes Joseph Dutton. With the rise of electricity from renewable sources and especially offshore wind farms, it will be necessary to rely on supply from outside unless winds blow, and vice versa – to export surplus that cannot be stored completely unlike hydrocarbons.
Fewer interconnectors could delay Britain’s energy transition, which pledges to achieve carbon neutrality in 2050, delaying the closure of gas power plants playing the role of a “Plan B” energy.
Moreover, the UK has introduced a carbon tax on electricity prices to finance its energy transition. The country may decide to waive the tax to ease the rising bills.