Prime Minister Theresa May delivered a speech on Brexit last week that set out her vision for the future economic partnership between the UK and the European Union. As part of the speech, the prime minister stated that “we will want to secure broad energy cooperation with the EU”. This cooperation includes protecting the single electricity market across Northern Ireland and Ireland, as well as exploring the options for the UK’s continued participation in the EU’s Internal Energy Market (IEM).
The IEM, as it stands, enables the trading of gas and electricity across Europe on a harmonised and tariff-free basis. The UK has been a principal driver in the design and implementation of this legislation over a number of years. If, as the result of Brexit, it ceased to participate in the IEM, the introduction of tariffs or differing trade arrangements could act as a barrier to the trade of energy across the UK’s borders. A number of undersea cables are currently under construction to trade power between the UK and various European countries, and it is increasingly likely that the UK will want to build more of these in the future. There is concern that the continuation of these projects could be at risk if the UK does not remain part of the IEM.
As seen during the cold snap last week, several short-term issues resulted in the National Grid issuing a gas deficit warning. One of these issues was a reduction in gas imports from Europe, highlighting the UK’s reliance on imports. Approximately 40% of power is generated from gas, depending on market conditions. Other factors impact the UK’s security of gas supply, such as imports of LNG, storage facilities, and the uptake of energy efficiency measures to help reduce gas demand. A recent report from E3G, the climate change think tank, pointed to the decline in the domestic energy efficiency programmes in the UK where 80% of heating is provided by natural gas. E3G has called for the government to prioritise domestic energy efficiency to reduce the excess winter mortality in the UK.