Why Europe and the UK are fighting over gas and electricity
In the event of a no-deal Brexit, the UK could lose access to the European energy market, affecting the country's costs and security
The EU's chief Brexit negotiator Michel Barnier is threatening to prevent the UK from entering the single energy market with the aim of securing a fishing rights concession from London.
THE THEME OF FISHING
In summary, that of fisheries – that is, relating to the access of European fishermen to the rich British waters – is one of the main points of friction between Europe and the United Kingdom, which is complicating the negotiations on the new trade agreement that should enter into force once the Brexit transition period, next December 31st.
Therefore, it seems that Barnier is trying to "exchange" the possibility of access for the United Kingdom to the energy market of the Union with the possibility for European vessels to fish within the British exclusive economic zone, in compliance with certain quotas.
WHAT IS THE ENERGY MARKET WORTH
According to the Bruegel think tank, based in Brussels, the permanence in the European energy market is worth around 6 billion euros a year for the United Kingdom: this is the value of natural gas and electricity traded through the British channel. Simone Tagliapietra, Bruegel's researcher, told Bloomberg that, in the event of a no deal on energy, the negative consequences "would fall disproportionately on the UK, given that the continental market is much larger and better integrated."
ELECTRICITY
For the United Kingdom, the exclusion from the European energy market would have repercussions primarily on electricity supplies. The country is a net importer, and its wholesale prices are higher than those of its neighbors. About 7 per cent of British demand reaches the country through five cables, of which four are connected to Europe.
Net electricity imports increased by 10 percent last year to a record 21.4 terawatt hours.
THE POSSIBLE CONSEQUENCES, WITH OR WITHOUT AGREEMENT
If the EU and the UK reach an agreement, then the gas and electricity trade is likely to continue without major differences.
Much could instead change with the no-deal . The UK should have new rules on the flow of gas and electricity between the various regions. And while these rules are likely to be similar to the current ones, Bloomberg writes, trading isn't likely to be as efficient.
The auctions for interconnector capacity between the UK and European nations are integrated with European electricity markets, so that energy flows where prices are highest. In the absence of this provision, flows may no longer follow prices.
The UCL European Institute estimates that in the event of a no-deal, the loss of the benefits derived from the integrated market will cost British consumers around £ 2 billion more per year.
RISKS FOR ENERGY SECURITY
And if relations between Brussels and London actually deteriorate completely, it could lead to an interruption in gas and electricity supplies, with serious repercussions for British energy security. The country would lose 7 percent of its electricity supply and would struggle to find an alternative source of supply. Risking, in the meantime, power outages during peak demand phases.
Gas is also worth about 80 per cent of the energy trade between the United Kingdom and Europe. Bloomberg adds that the UK depends on Europe for balancing gas in the network.
THE DAMAGE TO IRELAND
An eventual exclusion of the United Kingdom from the European gas market would, however, cause damage to Ireland, a member country of the Union: 56% of its needs are met by imports from the United Kingdom.
(Article published on Energia Oltre )
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/brexit-energia-mercato-unico/ on Sat, 14 Nov 2020 07:02:01 +0000.