Brexit update:

Following Theresa May’s ‘Hard Brexit’ speech on Tuesday 17th January, there are growing concerns that Britain’s exit from the EU single market could hinder development of new power links, driving up the cost of imported European electricity and gas, National Grid warned.

May’s speech outlined her vision of Britain’s future in a 12 point plan, which seeks the greatest possible access to European Markets. Stating that Britain would aim to establish its own free trade deals with countries far beyond Europe. However, May gave no indication of what this would mean for the energy markets. The UK currently obtains vast amounts of gas through interconnectors via Europe, potentially causing supply concerns.

EU imports for electricity currently make up 9% of UK supplies. Gas plays a very important role in meeting UK energy demand, nearly half of the electricity generated in the UK currently comes from gas-fired power stations, which is fuelled by imported gas from Norway’s Langeled, FLAGS and Vesterled pipelines. European supply also comes from the BBL pipeline and Dutch fields. The impact would be higher costs in gas prices; decreased storage; decrease supply security and decreased liquidity.

The chart below shows the UK energy mix by fuel type for power demand. As you can see there is a larger portion forecasted for gas, generated by Combined Cycle Gas turbines (CCGT) for 2017 which in turn generates electricity.

There are several more power links planned over the next decade, intended to give Britain access to cheaper electricity abroad. The country faces a supply crunch by 2020 as old nuclear power stations and coal fired power stations are closed down.  For these planned power links to be economically beneficial there must be robust trading arrangements between the two countries that the interconnect passes through.

Britain currently has access to a tariff free electricity trading with Europe but the Internal Energy market (IEM) stated that this would make cross border trade more difficult due to restrictions, higher costs for imports and movement of labour, if Britain was to leave the single EU market.

Information and Graphs from Reuters News.

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Read also:

Monarch: Brexit’s impact on the energy sector

Reuters News update: PM May indicates Britain will seek “hard Brexit” in EU talks

Norton Rose Fulbright: Impact of Brexit on the energy sector

Addleshaw Goddard: The Impact of Brexit on the UK Energy Market