This week EU chiefs meet to discuss future energy links with the UK post Brexit.
The gathering signals the EU27’s intent to mark out what level of access, and at what cost, the UK will get to the EU’s internal energy market.
Below are 9 issues to be across
1 — The UK is relying on interconnectors from the EU to meet energy demand in the 2020s, as the UK government’s 2018 energy projections underline.
“Following a sharp fall in coal fired generation in 2016, the DDM projects a further gradual decline in fossil fuel based generation out to 2035. This is displaced by more renewables and eventually nuclear based generation with increased imports (via interconnectors) until new nuclear capacity reduces the need for this in the 2030s.”
The UK has 4,000 MW of interconnection capacity to the EU. This is set to double by 2021. According to Imperial an extra several gigawatts of connection is planned in the period up to 2030.
2 — Yet energy exchanges between the UK and EU are at risk — according to a “note to stakeholders” dated April 27, in which the European Commission warned of implications for energy companies operating in the UK.
“As of the withdrawal date, United Kingdom based operators will cease to participate in the single allocation platform for forward interconnection capacity, the European balancing platforms and the single day-ahead and intraday coupling. United Kingdom based NEMOs will become third country operators and will no longer be entitled to carry out market coupling services in the EU.”
3 — As Dr Jonathan Marshall, head of analysis at the Energy and Climate Intelligence Unit observes in a recent blog post, this may mean the cost of power imports via interconnectors rises.
“Spelt out in no uncertain terms is the EC’s desire that, as a Third Country, the UK will be responsible for footing the bill for electricity transmission costs inside the IEM — adding a charge for transporting electrons from power station to interconnector on top of the cost of the electrons themselves. This additional charge could completely shake up the economics of interconnection, slashing the price differential between the UK and connected markets, and thereby reducing the appetite for importing power as a means of keeping bills down.”
4 — Leading energy companies are among those calling for links between the UK and EU to remain strong. On April 20 EDF, E.ON, RWE, SSE and EnergyUK wrote to lead Brexit negotiators Michel Barnier and David Davis arguing energy bills and security were at stake.
“The integration of energy markets and climate policies across Europe has enhanced energy and climate security and reduced energy bills in the UK and the EU 27. The Brexit negotiations should aim to ensure that these benefits continue in the future.”
5 — Billions of pounds of potential investments in the UK energy system are at stake, as a briefing paper from Chatham House makes clear:
“EU funds and European Investment Bank (EIB) loans account for around £2.5 billion of the UK’s energy-related infrastructure, climate change mitigation, and research and development (R&D) funding per year.”
6 — Failure to strike a deal could mean blackouts across Ireland, according to a 2017 UK Parliament report. The island of Ireland has — since 2007 - run on a single energy market (SEM) that has no regard for borders. The North and South rely on the UK for nearly 100% of gas imports, while the North is heavily reliant on electricity imports from the South and UK:
“Disruption affecting the efficient supply of energy and future investment could have serious implications for consumers. In particular, it could compromise a new interconnector between Northern Ireland and the Republic… the System Operator for Northern Ireland, SONI Ltd, has stated that without the planned North South Interconnector, it cannot be confident that “we can keep the lights on beyond 2021’.”
As one energy expert told a meeting at Chatham House this week an Irish solution “could be a decade away”.
7 — What’s the solution? One analysis by the E3G think tank calls for a climate and energy chapter in the new UK-EU agreement on a future relationship, cementing cooperation at a regional and international level.
“Climate and energy should be positioned in a similar way to defence, organised crime, data sharing and foreign policy as an area where the EU and UK should seek a deep level of cooperation that covers both trade and non-trade issues.”
This would potentially cover the UK-EU contribution to the 2015 Paris climate agreement. Given the need for deep decarbonization of the energy system by 2050 and the need to balance high penetrations of renewables and invest in infrastructure such as the proposed North Sea Grid cooperation is essential, argue E3G.
“It is therefore essential that these issues are discussed as a package in the negotiations rather than being separated into different areas. Aiming to achieve a specific climate and energy chapter of the final Article 50 outcome would be the best way to deliver this.”
8 — There are signs the UK and EU recognise the imperative of maintaining strong energy and climate links. The Brexit negotiating guidelines adopted by the European Council in March 2018 contained a new clause stipulating that:
“The future partnership should address global challenges, in particular in the areas of climate change and sustainable development, as well as cross-border pollution, where the Union and the UK should continue close cooperation.”
EU Brexit negotiator Michel Barnier built on this theme in an April 2018 speech, implying that a future trade deal between the UK and EU would require a “level playing field” on environmental rules:
“We should continue to promote the global solutions to climate change which the Paris agreement offers. The UK has always pushed for strong global action and high emissions reduction targets. We expect that it will continue to set itself the same level of climate ambition after leaving the EU. This will also open the way for practical cooperation between us.”
9 — The clock is ticking. Investments hinge on policy certainty. Clean energy investments in the UK are at their lowest for a decade, according to Bloomberg New Energy Finance. The next two European Council sessions will offer a sense of where we’re at:
28–29 June: European Council
18–19 October: European Council
Note: On a slight tangent, there are still concerns over how the UK’s nuclear industry will be regulated if and when it leaves the European atomic energy community — see below…
Set up in 1957, EURATOM is legally distinct from the EU but governed by many of its institutions, hence the UK deciding to quit.
Experts fear that without a successor offering the legal safeguards and monitoring that EURATOM offers, the UK may struggle to access nuclear technology from around the world. Spares for Sizewell B for example, which uses technology from US company Westinghouse.
