Could We Lose Power As We Sail Off? Why The EU Single Electricity Market Matters

02 October 2017

Six months into the divorce negotiations with the EU, we are still left wondering what Brexit actually means. People might have given up on getting any pertinent answers from this government, but the very least we should expect is that all the right questions are being asked.

Up to now only a few issues have been focused on in the negotiations, giving us a clearer idea of what the government and EU-27 want. The fate of EU nationals living in the UK has - rightfully - captured most of the public’s attention in recent months. While, the issue of our outstanding financial commitments towards the EU tops the EU’s negotiating agenda and tabloid front pages.

But most issues have not yet received the attention they deserve. Without a full understanding of what the EU does - and what the risks of leaving it are - in each field of public policy we simply cannot determine our objectives and strategy in the Brexit process.

This week I want to explore the implication of Brexit on how we power our homes and factories.

Electricity is peculiar in that we can’t store it, unless like Norway we have massive hydro-electric dams. Researchers around the world are beavering away to create technology capable of doing this, but today, supply has to match demand at all times to avoid blackouts. You can get a fairly steady supply of energy from carbon-intensive or nuclear sources, but it’s not the case with renewables yet. Solar panels and wind farms are heavily dependent on weather and geography, causing large variations in supply that need to be managed.

Britain has long championed renewable energy, and we are set to increase our efforts towards transitioning to a low carbon economy. This impacts not just supply, with renewable sources of energy, - but also demand, considering for instance the development of electric cars.

Tapping into the potential of the North Sea, we are one of the leading forces in Europe for wind power - behind Germany and Spain, but ahead of France and Italy. New production capacities in renewables are set to replace the phasing out of our dirty coal-fired power stations.

But when the wind is low off the North East coast and electricity production is down in our wind farms, we need to replace this lost supply with electricity from the continent - whether it’s sourced from Norwegian hydro-dams (as the new interconnector in Blyth will guarantee), Alpine waters or the Spanish sun. Likewise, when we have excess production we need to be able to sell it abroad.

Millions of pounds have already been invested to connect our grid to the continent. Two cables connect us with France and Belgium, while two others link the UK to Ireland. By the time we leave the EU, another two projects could be completed (including the Norway-Northumberland link), while many others are in development.

In practice, we tend to import more electricity than we export. About 6% of our electricity is imported from Europe through the existing cables. But with the development of new capacities in renewables in the UK, we may very well find ourselves a net exporter of electricity in the future. Such interconnection is not just a guarantee to secure our energy supply - ensuring the lights never go off - but it also helps get energy prices down, because electricity tends to be cheaper on the continent. It also ensures that prices do not vary too much, and makes the whole system more efficient through economies of scales.

For all of these reasons - energy cost, security of supply and most of all, supporting our transition to a zero carbon world - we need to be part of a fully functioning market for electricity, not just within the UK but at the continental scale of Europe.

The EU’s electricity market is framed by a series of EU regulations, with some of them currently in the process of being revised. The European Commission is pushing for a more integrated and fluid market. I strongly believe we should remain part of it.

There’s an obvious risk in putting up trade barriers: introducing tariffs would disintegrate rather than integrate the electricity market. But non-trade barriers, such as regulatory divergences between the UK and the EU27, would also have the same impact. This means that even after Brexit, we should endeavour to keep in tune with EU standards if we want to keep our access to the electricity market.

In addition, the EU has been an important source of funding for cross-border projects, such as interconnectors. The EU framework has also offered a safe and predictable environment for private investors, with long-term commitments.

A hard Brexit would mean losing all of this. It would set us back in terms of renewables and make it much harder for Britain to fulfil its international climate commitments. This would be bad for the planet and bad for business too, as we would lose ground on our international competitors.

Therefore, I stand by Labour’s call to remain in the single market - having a secure and clean electricity supply is only one of a myriad of reasons.

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