The UK's energy sector is set to be changed significantly by the country's withdrawal from the EU, with Energy UK CEO Lawrence Slade saying a hard Brexit would ensure the repercussions are mainly negative
Brexit uncertainty is already having an impact on the day-to-day business of energy companies, claims the CEO of trade body Energy UK.
In his blog, Don’t mess up our energy system, Lawrence Slade outlines the potential threats a hard Brexit poses to the industry as the March 2019 deadline for the country’s withdrawal draws nearer.
His organisation represents more than 100 of the UK’s largest energy-related businesses which, along with their customers, he argues are now facing disruption and financial strain.
Chief among his concerns is the ambiguity surrounding the Brexit negotiations and any possible framework outlining the fate of the energy sector following the EU Brexit summit on 28 June.
Mr Slade wrote: “With only nine months until March 2019, the Brexit process seems to be timed from one European Council to another.
“Little new information has emerged from this June council, however, on what the future holds or when the withdrawal negotiations might conclude and provide us with the clarity we desperately need on the future framework.
“We hope the upcoming White Paper will answer some questions.
“This opacity around what the future framework looks like and when it would begin has already started to impact the energy sector.
“In the energy world, operators have to plan in advance, because the delivery of energy into people’s homes and businesses is not a straight forward matter.”
Energy UK CEO on: EU Emissions Trading System (EU ETS)
Set up as the first greenhouse gas emissions trading scheme in the world, the EU ETS was launched in 2005 as a cornerstone of the EU climate policy aimed at combating global warming.
It’s not yet know whether a withdrawal from the EU will mean an exit from the system, however, and it’s this lack of clarity that’s causing problems in a sector that relies on long time assurance, according to Mr Slade.
“The uncertainty is already having a direct impact on the day-to-day business of energy companies,” he said.
“Suppliers buy their energy days, months and years in advance to find the best deals and limit customers’ exposure to the market’s volatility.”
“From the very early stages of the Brexit negotiations we have been clear that the EU ETS is the most cost-efficient way to price carbon and incentivise emission reduction investments.”
Leaving the EU ETS would create a policy gap that other methods might not fill as efficiently.
The most obvious replacement would be a carbon tax, but Mr Slade argued this would likely be strongly lobbied against by carbon-focused sectors, which would in turn put pressure on the energy sector and force them to raise prices.
“It would also undermine the UK Government’s carbon budgets and its ambitions under the Paris Agreement, as well as a potential earlier move towards zero net emissions,” he added.
“The energy sector has clearly demonstrated its commitment over the years to decarbonisation and has been leading the way.
“We are renewing this commitment by advocating that the UK should stay in the EU ETS.”
Energy UK CEO on: Clean Energy Package
The Clean Energy Package is a set of policies, legislation and actionable measure for the EU and by the EU targeted at making Europe’s sustainable energy network as viable as possible.
With the 2020 framework complete, international discussions over the past few years have centred on designing the framework for 2030 and beyond, in which the UK has had no small degree of input.
But yet more uncertainty over just how involved the country will be going forward as an entirely independent entity has raised questions over what to make of the progress.
“While the UK is still part of those discussions, it is not clear though how exactly we will contribute to this framework in the future,” the Energy UK CEO wrote.
“Does this mean that the recently agreed targets on renewables and energy efficiency should be disregarded?
“Over the years, the cost of renewables has been driven down and we find ourselves in a very different world to the one we were in when working on the 2020 framework.
“From the energy sector’s point of view, the European energy market as it is now and where it is heading is fully compatible with our vision and the trajectory we are on.
“The best way to get where we want to be is to stay in a framework that has delivered and that we have helped shape and continue to influence.”
Mr Slade concluded by looking ahead to the publication of the Brexit White paper set to be released this month.
Suffice it to say, it’s argued that the energy sector should feature heavily in the report as a pivotal area of the Brexit process, and that the UK remains as close to the current relationship it has with the EU when it comes to climate-related matters.
He added: “We believe the best way to preserve what we have created is to remain closely aligned with the EU framework, which supports our national efforts and the broader global ambitions.”