The effect of no deal Brexit on electricity
Although energy supplies will not run out following Brexit, there are likely to be “significant” price hikes according to the UK Government’s no-deal Brexit planning document.
The UK’s electricity markets are currently integrated into those of the EU, with common rules governing their operation. Significant cross-border flows of electricity take place between continental Europe and Great Britain; between Great Britain and the island of Ireland; and between Northern Ireland and Ireland. These flows, and the domestic markets, are currently governed through EU legislation relevant to the functioning of the EU’s Internal Energy Market.
The Northern Ireland electricity market is separate from Great Britain and different considerations apply. Northern Ireland shares a wholesale electricity market with Ireland, the all-island Single Electricity Market (SEM), an example of North-South cooperation that has benefited consumers and the economies of Northern Ireland and Ireland.
The Single Electricity Market involves significant cross-border flows of power between Ireland and Northern Ireland and operates within the framework of common EU rules on electricity markets.
The likely outcomes if there is no deal, according to BEIS:
- European energy law, including the EU Renewable Energy Directive, will no longer apply to the UK and the UK’s electricity markets will be decoupled from the Internal Energy Market.
- The Single Electricity Market may be unable to continue, and the Northern Ireland market would become separated from that of Ireland and have no legal basis.
- There will be implications for trade between the UK and the Single Electricity Market through interconnectors.
- Separate Ireland and Northern Ireland markets will be less efficient, with potential effects for producers and consumers on both sides of the border.
- Cross-border flows across electricity interconnectors will no longer be governed by EU legislation and new trading arrangements will be needed for trade and cross-border cooperation in operating the electricity system.
What’s the effect on meeting climate change goals?
Research from the University of Sheffield highlight that, because the UK has been a key player in securing EU climate regulations, and stronger environmental regulations, Brexit may affect the ability of both the UK and the EU in meeting the goals of the Paris Agreement, let alone Net Zero.
Without the presence of the UK, and with relations between the UK and EU strained, there is an opportunity for climate science denying governments to take more influence, such as Poland, the Czech Republic, and Hungary. Further, with the UK wishing to strike deals with the US, it may follow its lead in withdrawing from the Paris Agreement.
And on Carbon Pricing?
The UK would drop out of the EU Emissions Trading System (EU ETS), and BEIS would replace it with a fixed rate “Carbon Emissions Tax”. This would be set initially at £16 per tonne meaning that, coupled with the Carbon Price Support levied on the power generation sector, the effective price is £34 per tonne. The new arrangements would make use of EU ETS mechanisms to smooth the transition. However, the new tax will not cover aviation, a growing source of emissions.
