Brexit – Foreseen effects: Energy

ENERGYThe consequences of Brexit on the energy market will be assessed differently depending on the manner by which this exit will be negotiated.

First of all, exit from the EU could be a brake on renewable energy markets in the UK, since the EU will no longer be in a position to press London to achieve the 2020 Community renewable energy objectives. As regards  the market for natural gas, the UK imports 50%  from Norway and Qatar (through pipelines and on methane  tankers respectively). It is therefore likely that in this context there will be no major consequences, since both suppliers are not part of the EU.

Assuming an increase of costs,  Brexit could affect oil purchases as they would no longer occur through the facilitations currently available to the European  Economic Area (EEA) countries. The development of the electrical grid infrastructure will be surely more problematic.

Currently, the UK imports 6.5% of its national consumption,  with an interconnection capacity with Europe which is now undersized.

The National Grid Company has already announced plans to invest 500  million pounds  per year in light of an increase in electricity imports. While increased natural gas needs can be met through imports of liquefied natural gas by ship from neighbouring countries, it is much more difficult to apply the same approach to electricity grid market.

With reference to the above, the only possible and sustainable way is to enhance trading of electricity from Europe. Moreover, in light of the integrated EU energy market , which will have as direct effect the construction of high capacity transmission lines, it is necessary to point out that more production  will have to be followed by the strengthening of the transnational power grids. In the worst case  scenario, in which the UK completely exits from the European  Economic Area, infrastructure projects undertaken  by UK, such as the planned North Sea  network, could not access to the European  Union Funds.

In other words, the consequences of Brexit could weaken the UK energy industry and make energy independence much more expensive. It should therefore be observed that the impact of Brexit on these issues will depend on the terms of exit negotiation, being predictable a lower impact in case  of a strong cooperation between the UK and EU n energy policy.

You can consult and/or download the full version of the Brexit dossier here.

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