British energy consumers could be more vulnerable to energy shortages, power outages and price hikes as a result of Brexit.
That is according to a new report released by the House of Lords’ EU Energy and Environment sub-committee, which warns that a bungled Brexit deal would threaten the UK‘s energy security by putting its “current frictionless trade in energy with the EU at risk.”
The Brexit: Energy Security report looks at the implications that leaving Europe will have on energy supply, consumer costs and decarbonisation, including the impacts of Brexit on a range of energy issues, including the country’s role in the Internal Energy Market (IEM) and the nuclear power sector.
Below we take a look at the key findings of the report, and the potential impact of the risks identified on business energy consumers.
With the Government’s current intention to leave the single market following Brexit, the report states the UK’s chance of remaining in the IEM looks “unlikely to be possible” despite significant support from within the energy industry to do so.
Leaving the IEM is expected to have a serious impact on Britain’s security of supply, as energy trading with Europe – conducted via interconnectors – will be less efficient and costlier to consumers when done outside of the IEM.
Owing to our current dependence on European imports to meet our power demand, this would leave British consumers not only at risk of higher prices, but also vulnerable to supply shortages in the event of extreme weather or unplanned generation outages.
Even if Britain does attempt to remain in the IEM, the report warns on the other hand that the UK would be required to adopt European energy policy, leaving Britain with little say on its energy laws.
On the whole, the Committee found that EU investment has “made a significant contribution to constructing and maintaining a secure energy system in the UK, and that replacing this funding will be critical to ensuring sufficient infrastructure is in place to enable future energy trading.”
The report also highlights the potential impacts on the UK’s drive to decarbonise.
Besides renewable generation – an intermittent source of energy – Britain also needs nuclear generation to meet its fourth and fifth carbon budgets. However, leaving the EU could undermine the country’s capability of building future nuclear sites, due to curtailed access to specialist EU workers.
Not only that, failure to replace the provisions of the Euratom Treaty by the time the UK leaves the EU could result in Britain being unable to import nuclear materials.
As outlined above, the likelihood of Britain leaving the IEM would mean a less efficient trading system between the UK and EU, ultimately hitting British consumers in the pocket as a result of higher energy prices. But what kind of cost increases can we expect exactly?
Though this is hard to predict, a National Grid report puts the figure at up to £500m extra per year added to UK energy bills. This cost would be made up of technical factors resulting of losing access to the IEM, as well as potentially having to rely on gas imports from further afield (such as Russia) in order to meet demand.
Reducing the risks – our view
As a result of the implications posed by Brexit, in its report the sub-committee calls on Government to outline 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.
In short, only sensible negotiations and meticulous planning will see Britain’s energy industry – and its energy consumers – avoid the most negative potential impacts of Brexit.
Come what may of Brexit negotiations, Britain would do well to continue investing in its smart energy future. Nationwide and localised smart grids made possible by a higher penetration of renewables and use of flexible technologies will help safeguard Britain’s energy security for future generations, whatever the consequences of the Brexit deal.
What can you do?
In the meantime, though there is little that British energy consumers can do to influence UK-EU negotiations, there are certain ways of effectively mitigating the potential negative impacts of Brexit – particularly when it comes to price risk.
During this time of uncertainty, find out more about how we are helping organisations become completely #energyconfident when it comes to energy prices by clicking here.
To talk to our experts about how we can help you reduce your price risk, contact us today! Call us on 02920 739 540 or email us and we’ll get back to you.