What's at stake for European energy post-Brexit?

Written by Iain Conn on 20 December 2016 in Thought Leader
Thought Leader

Iain Conn asks, what's at stake for European energy post-Brexit?

Iain Conn

Iain Conn | Photo credit: Centrica


Emotions are running high around the UK's decision to leave the European Union after 43 years of membership. It will be a difficult negotiation but energy, like all cross-border network industries, should not be a zero-sum game. Both the UK and the EU would lose out if our energy relationship was put in question.

Why does Centrica care? We are a major North Sea producer, a power generator in nuclear and natural gas fired power, and the leading UK energy supplier. We own Bord Gáis Energy, one of Ireland's leading providers of gas, electricity, and energy services.

Our recent acquisitions, ENER-G and Neas Energy, operate in various member states. European cooperation has been mutually beneficial for the UK, for the EU and for Ireland. From the perspective of the UK, the internal energy market brings strong benefits for security of supply and competitiveness.


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As an energy importer the UK is increasingly dependent upon European markets for the volume and price of natural gas and electricity. 

The UK also attracts significant inward investment from continental energy investors such as EDF, Siemens, Dong and Iberdrola. By being part of the EU emissions trading scheme (ETS), the UK has access to the best market mechanism for cost-efficient decarbonisation - although the price signal for carbon remains too low.

The UK's contribution to European energy is significant. The UK has been a driver of the internal energy market. UK-EU gas interconnectors provide an important gas import route to the EU, and the north-west European gas market works very well, to mutual advantage.

The UK has been the leader among G20 nations on climate action over the last 15 years, ranking first on the reduction of its overall carbon intensity. Other member states would need to step up their climate efforts if the UK was to exit EU effort-sharing arrangements. Ireland faces two particular energy challenges. 

First, access to the EU energy markets runs through the UK. If the UK is no longer part of the wider European energy market, Ireland risks energy isolation. Ireland is almost entirely dependent on gas from the UK for its supply and it also imports four per cent of its electricity from the UK system. 

Second, the operation of an "all-island" single electricity market between the Republic of Ireland and Northern Ireland could become more difficult if the UK regulatory framework diverged significantly from EU rules post Brexit.

The best way to realise our three goals - competitiveness, security of supply and decarbonisation - is to keep working together. There are many difficult issues around Brexit, but energy and climate should not be one of them.

 

About the author

Iain Conn is Group Chief Executive of Centrica plc

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