Brexit indecision is certainly a hot topic for businesses right now. As we wait to find out what comes next, one issue of concern to many is how leaving the EU will impact our energy supplies.
At the end of March, National Grid sought to reassure businesses that a no-deal Brexit outcome would not result in an energy shortage. In fact, measures are said to have been put in place for all scenarios.
According to Reuters, National Grid stated that electricity and gas flow from continental Europe would not be impacted.
Imports of electricity via interconnectors currently account for five to six per cent of British supplies. However, it should be noted that if the UK leaves the EU with no deal in place, energy trading would default to World Trade Organisation rules. The National Grid said this would apply “for the majority of countries”.
Importantly, electricity and gas shipments between EU and WTO countries are not subject to tariffs.
It was recently reported that the development of several new power cables between France and the UK has been put on hold while the Brexit deal plays out.
Construction of two new interconnectors is underway, but talks on three more have been paused and this has potential to impact prices.
“As the U.K. often benefits from low power prices from France, less interconnection with that country can inadvertently translate to higher power prices,” said analyst Andreas Gandolfo commenting on the situation in this article from Bloomberg.
Britain sources a large percentage of gas in the from of liquified natural gas from countries such as Russia, the US and Qatar and there is no anticipation that demand will not be met.
Rules and Legislation
There are other issues for the energy industry to tackle too. If we leave without a deal, European energy law will not apply in the UK and therefore new trading arrangements for electricity interconnectors will need to be developed and new access rules put in place.
The government stated it will “ensure the UK’s energy laws continue to work after the UK leaves the EU.”
Some experts have stated that leaving the EU may impact on energy policy in the longer term but for now, it would seem that cross border supply isn’t expected to alter significantly in the immediate future.