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The Probable Impact of Brexit on the UK Energy Sector

Concerns about the possible impact of the UK’s Brexit on the energy industry were aired by several institutions, including the trade association Energy UK and Durham Energy Institute (DEI).

Several issues have been put to light that industry players believe would create a divide between the government and its citizens. Some of these effects include major businesses leaving the UK, job losses for every sector and the likely slowdown of the economy.

 

Anticipated changes due to Brexit

 

The Energy UK, an energy industry trade association, believes that the Brexit could lead to higher energy bills for consumers, among other potential problems brought about by the country’s controversial exit from the European Union.

 

Additionally, the Durham Energy Institute (DEI) has claimed in its 2018 energy security report that energy shortages may be experienced in the UK following the Brexit. The institute has recommended collaboration with the EU to mitigate conditions like the apparent increase of prices due to loss of support from Euratom, EU ETS and the EU.

 

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DEI warned that the UK’s post-Brexit energy industry might be vulnerable to shortages, particularly since it might struggle to meet demands on power and heat using its domestic supply. Fluctuating international energy supply could also put it further at risk.

 

The Energy UK pointed out the uncertainty of whether the carbon trading scheme EU Emission Trading System (EU ETS) will remain after Brexit. It also cited the issues concerning the nuclear industry should Britain leave Euratom, lacking a replacement body to fill the gap.

 

Uncertainty of the future

 

The UK’s energy industry is directly influenced by energy importation and exportation. Currently, the UK imports 5% of its electricity and 12% of its gas supply via the EU’s interconnector system. Members of the union can use the system for free.

 

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With the Brexit, the UK would have to pay the tariff to utilise interconnectors. Simply put, energy prices will be based on the fees.

The country, as a member of the EU Emission Trading System, would have to handle the effects on its carbon trading as it leaves the EU. This trading system is crucial for the nation’s legally-binding net-zero goals by 2050.

 

Lawrence Slade, Energy UK chief executive, said there is uncertainty about the carbon pricing mechanism of the UK. Carbon costs would be on limbo, which could subsequently make it very difficult to determine prices for thermal generation.

In the nuclear sector, impediments on research, skilled labour, transportation and other aspects could happen once the UK exits the European Atomic Energy Community (Euratom).

 

Currently, 21% of the UK’s power is generated by nuclear reactors. Negotiations determining the future of nuclear are still uncertain at this time.  Consumers would likely feel the effects through an increase in tariffs and taxes.

 

Re-focusing the sector

 

Despite the many possible issues due to Brexit, many believe that it could help develop the power industry. It could prompt the government to put emphasis on UK policy and its reinforcement. Energy efficiency could be the focus for future decisions in the sector, as well as a strengthened commitment to demand reduction and decarbonisation.

 

The UK has the opportunity to separate its ambitions and realign its policies and regulations to focus on local priorities. It could also open up the chance to connect with foreign operators and investors going forward with its energy targets.

 

 


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Electricity, Energy Industry News, Gas