Lords and industry warn of Brexit threat to UK’s energy trade

Trade association Energy UK is the latest to call for the UK to maintain a close trade relationship through ‘regulatory alignment with the Internal Energy Market,’ in a new position paper: Brexit and future EU-UK energy relationship.

This follows a report: Brexit: energy security, from the House of Lords’ EU Energy and Environment Sub-Committee, which said that Brexit puts the UK’s current ‘frictionless trade’ in energy with the EU at risk.

Energy UK says that the future UK-EU energy relationship should also be based on maintaining the Single Energy Market on the island of Ireland; and working closely with the EU to tackle climate change. These principles are crucial to ensure the efficient trade of gas and electricity, and to maintain security of supply while keeping costs down for UK and EU consumers, says the trade body.

Other priorities for the industry include securing trade and customs arrangements that allow the free trade of energy equipment, as well as implementing a sensible personnel migration system, adds Energy UK.

Noting that the EU supplies approximately 12% of the UK’s gas and 5% of its electricity, the House of Lords report says that the UK will need to continue to trade energy with the EU in order to meet demand. If such trade takes place outside the Internal Energy Market, it is likely to be less efficient and this creates the potential for higher energy bills, and for potential supply shortages in the event of extreme weather or unplanned generation outages, according to the report.

The Committee urges the government to set out how it will work with the EU to anticipate and manage supply shortages, and to assess what impact leaving the Internal Energy Market would have on the price paid by consumers for their energy.

The Lords Committee has also stressed that the Euratom treaty is fundamental to the functioning of UK nuclear energy generation and that, in a worst case scenario, failure to replace its provisions by the point of withdrawal from the EU could result in the UK being unable to import nuclear materials, bringing its civil nuclear industry to a halt.

Other potential challenges to UK energy security highlighted by the Committee include:

• Without access to specialist EU workers, there are serious concerns over whether the construction of new nuclear generation sites (including the government’s flagship Hinkley Point C project) is feasible. 
• EU investment has made an important contribution to constructing and maintaining a secure energy system in the UK. Replacement of this funding is critical to ensuring sufficient infrastructure is in place to enable future energy trading. 
• The UK's influence on future energy policy is likely to be severely constrained post-Brexit. The government should conduct a frank assessment of its potential influence, taking note of the difficulties faced by other non-EU countries such as Switzerland and Norway.

Lord Teverson, Chairman of the EU Energy and Environment Sub-Committee, said: ‘Over the course of the inquiry the Committee heard about the benefits of the UK’s current energy relationship with the EU, and the Minister acknowledged these benefits when he stated his hope that Brexit would result in as little change as possible. It remains unclear, however, how this can be achieved, without remaining in the single market, Internal Energy Market and the other bodies that develop and implement the EU's energy policy.’