The European Community Committee of the House of Lords has just launched a report on energy security after Brexit, and it is a wakeup call on problems the UK faces if we are outside the single energy market.
Although it appears that generation is one of the few areas that the UK could be self-sufficient, the lack of generating built capacity means that we are reliant on 5% of our electricity at present and this is set to rise significantly over the next five years.
The UK will be reliant on the inter-connectors and the regulations that underpin the Single Electricity Market (SEM). This may become a real issue after Brexit when we will not only be outside the market but as a consequence will not even have the ability to influence the rules under which the market operates.
The report highlights a number of areas of concern.
The cost of energy is likely to rise either through the imposition of tariffs or through a more bureaucratic process that will be introduced through operating outside the single market in energy.
There will be a risk that one of the real benefits of the peace process that led to a common energy policy across Ireland will lead to higher costs and issues of energy security.
Leaving Euratom which has been linked to Brexit, will mean that we are outside the regulatory process that governs the nuclear industry and could make the generation and transport of nuclear materials and technology difficult.
The Government has not said how we will operate outside the treaty and this could have a major impact on the UK’s ability to run a nuclear program, and at the very least escalate costs significantly.
The cost of developing generating assets could cost a great deal more after Brexit as utilities will not be able to access European financial support especially drawing on funds from the European Investment Bank.
The report is not wholly pessimistic, there could be some positive outcomes of Brexit, developing energy policy without some of the restrictions that the single market requires such as state aid restriction on investment could be possible.
The report is well worth a read and can be found here.
By Lord Redesdale, CEO at the Energy Managers Association (EMA).