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Energy and Brexit: What will change?

The UK has become dependent on the energy imported from Ireland, France, The Netherlands and Norway, along with other members of the EU to a lesser extent. This could create a large problem, but it all depends on the deal we achieve post-Brexit.

In this article, we’ll explain what changes are due to happen, and what aspects will stay the same.

Oil and gas markets are worldwide and aren’t controlled by the EU. While they have a part in it, it’s just because their countries take part in the trades- not because they can influence rules. Short-term there won’t be any noticeable change, and supply is safe- there’s virtually no risk of shortages.

However, the country’s long-term view will change due to the EU Internal Energy Market (IEM).

What is the IEM and why is it important?

The IEM is a mutual agreement for tariff-free energy between EU countries. According to the official EUR-Lex website, it sets out to achieve two things:

·         It seeks to introduce common rules for the generation, transmission, distribution and supply of electricity.

·         It also lays down universal service obligations and consumer rights, and clarifies competition requirements.

After Brexit, the UK won’t be able to have a say in any of these rules, but may be able to change their own rules for the distribution of energy. This depends entirely on the deal we achieve upon leaving, as there is a chance we’ll have to continue with the EU regulations if we’d like to take part in the trading group.

A close relationship with the IEM is high on the list of priorities for the UK Government in the Brexit negotiations, as this would allow the country to retain access to the benefits included in it, namely the increased security of supply, market coupling, cross-border balancing and capacity market integration. If we’d like to continue prospering, this does need to be achieved.

How will it affect coal?

Coal plants in the UK are required to follow the EU Industrial Emissions Directive (IED), a set of rules designed to keep emissions as low as possible. These rules require a lot of money to make sure the facilities are up to scratch, and so 6 of the 7 coal plants open in the UK have decided not to make this change. As only one would stay open, the government has made the decision to remove coal from the fuel mix entirely by 2025.

How will it affect gas?

As Norway, a non-member, provides 38% of the UK’s gas, it is predicted that the UK may not need a large change in policy to operate in a similar way as it does now.

However, Oxford Energy have said in a recent report that “post-Brexit, EU-26 would be slightly more dependent on foreign gas than the former EU-28 but both the UK and Ireland would be much worse off. From being hardly foreign dependent at all, the UK and Ireland would become respectively 42 and 97 per cent dependent on foreign gas.” (report available here: https://www.oxfordenergy.org/wpcms/wp-content/uploads/2017/01/Brexits-impact-on-gas-markets-OIES-Energy-Insight.pdf)

The country is in a close relationship with the EU currently, and “no deal” could mean tariffs on gas, but we’ll have to see how it pans out. Nonetheless, we are certain almost 40% of our gas is safe and tariff-free.

How will it affect nuclear energy?

Euratom is an organisation in the EU that regulates the nuclear industry across Europe, safeguarding the transport of nuclear materials, disposing of waste and carrying out research.

The UK has already made it clear that it would like to withdraw from the European Atomic Energy Community (Euratom) and stop following the associated treaty (the Euratom Treaty) as part of the Article 50 withdrawal process.

While this may seem like it’s thrown a lot of safety concerns up in the air, the Government has made clear withdrawal from Euratom will not affect our country’s nuclear security. A UK Nuclear Safeguards Bill was created in October 2017, highlighting how this will be achieved (through altering the Energy Act 2013.)

The final agreement between the UK and Euratom after Brexit will, however, have big repercussions for the country, as it is (unlike countries such as Germany) committed to atomic energy for the long-term.

Overall, if the country can handle the change, it won’t affect much.

Will the EU continue to invest in our projects?

Any funding given to us by the European Investment Bank (EIB), owned by the 28 member-states of the EU, isn’t guaranteed to continue.

In 2015, the EIB provided £5.6bn of funding for us to start or maintain a wide variety of projects, including infrastructure, social housing and renewable energy. They have invested over €13bn overall into UK energy projects since 2010.

To continue to receive this funding, we will most likely have to follow the EU State Aid rules. If not, we would likely need to comply with WTO subsidy rules, quite similar in stature.

The draft EU Withdrawal Treaty has stated that this funding will go on for projects approved by the EIB for investment before the 29th March 2019, but after that, the UK will not be able to receive the funding available for members of the EU.

However, if the UK comes up with a project that agrees with the EU’s outlook, such as a drive towards renewable energy, or a pipeline that will benefit both the UK and the EU, it can still receive funding.

Conclusion

There are a lot of uncertainties behind Brexit. We don’t know for sure what will exactly happen to our energy market, but there’s a quite large chance that not much will change.

 

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