As the UK looks to decarbonise its grid, maintaining an effective relationship with the European Union (EU) has never been more vital to ensure energy security. NCE spoke to experts to discuss whether Brexit has affected its foothold in negotiations.
Energy security
With Russia’s illegal invasion of Ukraine, the majority of the EU has sanctioned the use of Valdimir Putin’s state-owned Gazprom’s natural gas supplies. This sent shockwaves through the continent as a number of nations, including the UK, relied on Russia’s natural gas reserves to burn for electricity when gaps in supply started to form.
“The war in Ukraine really highlighted how dependent the EU as a block was on Russian gas and on secure but insecure supply lines,” said Social Market Foundation (SMF) senior researcher Niamh O Regan.
“It’s a question of what do we have here with the whole knock-on effect, because the increased wholesale gas price has increased the cost of other energy.”
A winding down in dependence on Russia’s gas has accelerated the UK’s vie for net zero, accelerating plans to stop the use of fossil fuels, including natural gas, to powering its grid. In September, Ratcliffe power station came off the system for the final time to mark the end of 142 years of coal power in the UK.
National Electricity System Operator (Neso) data released in January showed 51% of all the electricity generated in the UK last year came from renewables, the highest intensity renewable generation there has been to date.
The government has pledged to make the UK a “renewable energy superpower” and preached energy security. However, with the intermittent nature of the most prominent forms of renewable energy and natural gas supplies limited, the question of energy security is tricky.
EU relations
One tactic the UK and EU nations take part in to fill gaps in their electricity generation is with energy trading. This has led to a massive push to construct electricity “superhighways” – high voltage direct current (HVDC) interconnectors – connecting the UK with EU power networks via extensive undersea cables.
Now the UK is not part of Europe’s free markets, more emphasis is being put on how these negotiations are panning out. Five years on from Brexit, the energy systems and security of the two remain undeniably linked but according to O Regan that does not mean that everything is going well.
“It hasn’t been catastrophic – we haven’t had massive shortages – but electricity has become more expensive and it already was more expensive because of certain levees,” she said.
“The way electricity is traded between the UK and the EU at the minute has made it more expensive which then gets passed up to consumers in the end.”
She describes this as “problematic” but says it’s unlikely to stop while it remains affordable.
“Anything being more expensive needs to be addressed though, especially in the current environment with the current ‘fiscal black hole’,” she added.
The price of electricity for consumers in the UK has hit Parliament as today, 28 March, the Public Accounts Committee (PAC) released a report warning of worryingly high consumer energy debt as the UK’s electricity prices are the highest of countries providing comparable data.
The PAC’s report states the government has more to do to convince Parliament of the security of UK energy supplies. In the report, which heavily discusses he support schemes government have used to reduce the impact of energy bill price spikes, the PAC calls for more attention to be paid to support for consumers at greater risk of fuel poverty and those falling behind with their energy bills.
Even after the initial shock of the energy price crisis subsided, the UK had in 2023 the highest electricity bills of countries providing comparable data, the PAC has revealed.
Trading agreements
The current energy trading arrangements between the EU and UK are defined under the Trade and Cooperation Agreement (TCA). As O Regan pointed out, the part of the agreement on energy includes an arrangement on the “optimised use of shared infrastructure”, deeper cooperation and improved efficiency.
A 2022 deadline for developing a new model of electricity trading passed without anything being done, inevitably making energy trading less efficient.
The TCA, where energy is concerned, will expire on 30 June next year and all eyes will be on the UK government to negotiate a new agreement. This will play into prime minister Keir Starmer and his Labour government’s intent on resetting the UK’s relationship with the EU, post-Brexit.
“In my mind, and to the mind of UK widely, I think it would be illogical for the government not to look at this with importance,” said Energy UK policy manager Robert Birch.
“It seems like quite a low-hanging fruit in terms of trying to build a stronger UK-European relationship as part of this wider reset, but I would think this would be something the government would really want to focus on.”
If a new agreement isn’t negotiated by summer next year, there is a sunset clause which would see it extended, reviewed and reapproved on an annual basis.
European economic think tank Breugel believes that because the agreements on energy in the TCA are technically a temporary arrangement, there is a lack of certainty around energy, dampening business cases for private investors into the UK’s energy markets.
This is a big concern for industry in the UK.
“For industry trying to make decisions about investment, the uncertainty of having a really important bit of legal text that is potentially up for review every year is a real concern,” Birch said.
“We would definitely want a long-term extension to the energy cycle to give us certainty and if it doesn’t apply, there will inevitably be some negative consequences.”
The lack of certainty around the future of the TCA has further affected the UK’s ability to trade energy efficiently.
“Whilst there is still ongoing uncertainty around the direction that electricity trading will go in, at the moment, we’re on various inefficient arrangements,” Birch explained.
“The government has been negotiating more efficient arrangements with the EU for a very long time now, without necessarily getting too far.
“If the energy cycle were to expire, then, quite frankly, there wouldn’t really be a need for either side to negotiate the arrangements because that’s all underpinned by the TCA.”
The TCA also underpins a number of legal documents aiming for further cooperation in the North Seas.
“These are in certain memoranda of understanding, for example, and explicitly state that it will only apply whilst the energy cycle is in place,” Birch said.
Interconnectors
The UK is currently going through a watershed moment in its proposed extended use of interconnectors to link our grid with EU grids. The UK currently has 9.8GW of interconnector capacity with connections to France, Netherlands, Belgium, Republic of Ireland, Norway and Denmark up and running. Meanwhile, further interconnector projects such as Lion Link (UK to Netherlands), Nautilus (UK to Belgium), Tarchon (UK to Germany) and others are in development.
There was an expectation before Brexit that the use of interconnectors would continue to define the energy relationship, even after the UK left the bloc. However, a number of concerns over how the energy trading relationship would inevitably change and the impact this could have on the UK’s energy security have arisen, with scaremongerers positing that EU nations could turn off their interconnectors and pipelines to the UK.
O Regan isn’t necessarily worried about this.
“I don’t even know if that is physically possible,” she said.
“The idea is that in terms of cutting off pipelines, while it’s technically fine, it is highly unlikely to happen because it’s a relationship that works both ways.
“When it’s really windy here and you have a still day in France or the Netherlands, we can send that energy over and vice versa.”
Birch agrees stating the use of interconnectors will be only more important as both the EU and UK grids move towards decarbonisation and outright net zero by 2050.
“As we get more renewables on the system in the UK and as we move towards a clean power system in the UK, and as similar transitions happen across Europe, there will be a much more variable power system,” he said.
“Interconnectors are one of the main tools that we have in the arsenal to balance all of these different things out.
“Trying to bring together all these different aspects of the grid that we’re going to have in a few years time is really important.
“Certainly, between now and 2050, having an efficient set of rules by which the UK and the EU can both be happy with but also can operate efficiently will be vital in defining the future of the UK EU energy relationship.”
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