As the UK hurtles towards the Brexit deadline of 31 October, how is leaving the EU likely to affect your electricity prices?
Energy imports from the EU
Up to the end of 2018, the UK was importing around 5% of its electricity from the EU, and 12% of its gas. Energy is supplied via under-sea pipes and wires called interconnectors, and the UK has interconnectors with Belgium, France, Ireland and The Netherlands.
5% may not sound a lot, but this rose to an all-time high of 7% in the first quarter of 2019 after the opening of the interconnector with Belgium and the government intends to increase imports to around 20% by 2025 as it phases out our remaining coal-fired power stations. To that end, interconnectors with Denmark and Norway are being built and a further seven are planned. In short, the UK is becoming more and more dependent on imported energy.
Will my bills go up?
The leaked Operation Yellowhammer report suggests there could be a marked rise in energy prices for UK homes and businesses. Some of the reasons for this are:
- The absence of trade agreements governing the cross-border flow of electricity will end the frictionless trade we currently enjoy. The costs of any new tariffs imposed on the UK are likely to be passed on to consumers.
- Transportation and import costs will rise if the UK leaves the EU Internal Energy Market.
- The EU may reduce its investment in interconnectors with the UK.
- The UK is currently part of the EU Emission Trading System (EU ETS), which puts a price on carbon through trading of emission permits. Should we leave, a replacement carbon pricing mechanism could prove more costly.
- The falling value of the pound against the euro could lead to an increase in the market price of electricity.
University College London produced a report which showed a £2 billion rise in UK energy bills after the 2016 referendum, as the pound fell sharply. That translates to a £35 annual increase on the average household electricity bill, with a predicted increase of a further £61 every year thereafter.
Lawrence Slade, chief executive of Energy UK, also fears the worst. He said, “The lack of certainty around the future carbon-pricing mechanism as well as the rules underpinning the cross-border trade of electricity and gas create risk, and risk has a price. This situation is likely to create cost pressure that will feed through to customer bills.”
Energy shortages ahead?
Gas-fired power stations in the UK supply 42% of our electricity and much of that gas comes from Europe, so the race is on to increase renewable energy. While our windfarms performed well last winter, we still rely on power from our interconnectors to balance supplies during extreme weather or when wind and solar power is unavailable. Should the continent experience a prolonged cold snap, EU countries could restrict UK access to their energy stores in order to give priority to their own citizens, so it is possible that power shortages could ensue.
Can I protect against price hikes?
You may want to consider reviewing your domestic or commercial installation to make sure it’s as efficient as possible. Our expert engineers would be happy to assist. Contact us for further information.