Date: September 28, 2018
Author: Lebona Vernon

On 29 March 2019, the UK will cease to be a member of the European Union.

With less than 7 months remaining until we make what is sure to be a historic exit, and the increasing possibility of a ‘no-deal’ looming, the exact details of the UK’s exit from the European Union are still unclear. With negotiations between the EU and the UK still on-going, it is hoped that an agreement on the outline of future relations will be reached by October 2018.

One of the biggest questions being asked surrounds the impact a no-deal outcome could have on energy supply & security of supply. What does a no-deal Brexit mean for energy supply? And what will be the overall impact on the UK wholesale market?

The general assumption is that a deal will be reached, however, this is almost like burying your head in the sand and hoping for the best. If a deal is reached, we would hope that the UK will be allowed continued access to the IEM (Internal Energy Market) as a third country.

However, in order for the UK to continue to participate in the IEM after Brexit, an appropriate partnership with the EU would need to exist and this would involve the UK adopting and complying with all relevant EU IEM legislation. With time running out and negotiations still ongoing, this is still looking unlikely. Currently, many of the UK’s negotiations and terms for Brexit appear incompatible with full membership of the IEM and this could have serious implications for the future energy supplies.

When it comes to energy, the UK benefits from being part of the EU energy market. With Parliament having recently decided to reject continued membership of the European Economic Area (EEA) after Brexit, the UK’s exit from the IEM is looking increasingly likely. If this happens, there will no longer be any court to hold the UK to account when it energy.

Despite this, the Government recently announced that the UK will continue abiding by REMIT (Regulation on Energy Market Integrity & Transparency) for wholesale trading & operations. However, there’s currently no mechanism in place for involving a non-EEA country in ACER (Agency for Cooperation of Energy Regulators) to facilitate data exchange and compliance under REMIT.

As it stands, there is currently no clear indication as to what Brexit will mean for Britain’s electricity sector with Brexit leaving the UK more vulnerable to energy supply shortages and an increase in prices. Ultimately, a “no-deal” outcome will see prices rise, particularly overnight when the UK imports energy via the IFA1 Interconnector to France and this will likely increase prices for Summertime STOR (Short Term Operating Reserve). The lights won’t go out, but it will cost more to keep them on.

Brexit is happening and there’s nothing we can do to stop it. With the future of energy supply still unclear, the way we get our energy is likely to develop significantly over the coming years, but that doesn’t mean we can’t prepare for it. Here at KiWi Power, we aim to be global leaders, leading the way in managing electricity demand through technology by challenging the status quo.