What does Brexit mean for UK businesses’ energy supply?

Having a reliable and affordable energy supply is vital to all businesses but how will Brexit impact on that. Nicky Bannister outlines the situation so far

If you run a business, you understand how important it is to establish an energy deal that’s reliable and competitive. Do so and you should be able to keep overheads low and productivity high, thus enabling your firm to operate as effectively and profitably as possible.

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Unfortunately, business owners are facing another headache in that there are concerns about where their energy supply will be generated once the UK officially exits the European Union (EU), as far as we know, in the next few months. Once Brexit occurs, people may find themselves questioning what the impact will be should the UK lose its place within Europe’s Internal Energy Market (IEM)?

At the start of 2018, a House of Lords committee also sent alarm bells ringing when they warned that energy shortages could occur throughout the UK — as well as hikes to both household gas and electricity bills — post-Brexit if the transition fails to be managed well. When presenting at the committee, the Durham Energy Institute underlined: “Whatever the final detail of the EU exit terms, the UK is likely to be more peripheral to EU energy markets which will mean higher prices and more unreliable supply.

“Also, supply risks will increase around issues such as importing gas through subsea pipelines or electrical interconnectors linking the UK to other EU countries.”

The UK has become more reliant on energy imports from various countries over the years, including those delivered from Ireland, France, The Netherlands and Norway, on top of those received from other European partners. This could have major implications if we can’t secure a harmonised energy trade deal – with UK businesses (and homeowners) facing potential power shortages matched with increased energy costs.

A ‘green Brexit’ is a vow that’s been made by the Government. However, some experts believe the environmental implications could also be serious. By leaving the EU, the UK would effectively no longer be legally bound to meet EU climate change targets. This means current measures to build a greener, more efficient energy landscape could in turn slow, or stall.

Our analysis of what the UK leaving the EU may mean when it comes to the nation’s energy infrastructure could answer some questions businesses may have about the future of their energy supply.

What is meant by the Internal Energy Market (IEM)

Founded in 1996, the IEM has been tasked to facilitate energy trading across states of the EU. It enables European countries to trade energy quickly, cheaply and easily – allowing them to respond to peaks and troughs in demand and supply. Effectively, countries in need of more energy can access it, whilst those producing more energy than they need can trade it in a common marketplace.

Tax and pricing policies are looked at by the IEM too. The organisation also sets (and implements) norms and standards to guarantee the protection of the environment and the public’s safety.

How does the IEM affect businesses?

The ultimate goal that the IEM works towards is to protect the rights of customers. This is the case whether individuals or businesses are the focus. The organisation also tackles energy poverty by guaranteeing the availability of affordable gas and electricity. One way it does this is by developing pan-European supply networks that transport energy between countries. It’s also responsible for defining the roles and responsibilities of the key players in the energy market, and acts as a regulator to ensure the security of our energy supply.

How might Brexit change things?

Businesses may find it harder and more expensive to keep their lights and heating on within their workplaces once Brexit has occurred. Why? It’s all to do with interconnectors, which enable a cheap and easy flow of energy across borders. Interconnectors form a big part of the UK’s energy mix, and without access to them, the country could experience shortfalls, pushing energy prices up at the same time.

Over the last few months though, the energy sector has tried to reassure the nation by building new links to Europe. In fact, 11 new connections that link the UK to other European countries were either under construction or had been mooted by developers as of August 2018.

Speaking about these new interconnectors to The Guardian, Jon Butterworth, who heads the National Grid’s interconnectors business, pointed out: “From our perspective, and from the perspective of the general public, there’s not a lot of downsides to interconnectors.”

Mr Butterworth also believed that the fundamentals of interconnectors will remain unchanged once the UK exits from the EU. He explained: “When you talk to very senior civil servants [in Brussels], they say we still believe interconnectors are great things for Europe.”

Will a business’s eco obligations change if the UK leaves the IEM?

EU member states have worked hard throughout the last decade to ensure each nation was producing cleaner energy. However, reports suggest that once the UK exits the single energy market, UK businesses will cease to be subject to the same EU rules, regulations and targets surrounding renewables and energy efficiency. Whilst the UK government is adamant it will continue its unwavering commitment to tackle climate change, Brexit has the potential to delay or suspend current energy efficiency measures, pulling us further away from meeting 2030 carbon reduction targets.

How businesses can prepare for Brexit from a power perspective

If the UK suffers a problem with its energy supply after Brexit has taken place, the nation may no longer rely on the reassurance of getting a helping hand from other EU member states to ensure their lights stay on. With this in mind, experts expect the UK to become more vulnerable to power shortages – whether that’s due to extreme weather events, or generation outages in the pipelines or electrical interconnectors.

It’s wise for businesses across the UK to not delay shopping around the market so that they can secure the best energy deals post-Brexit. The silver lining is that you can keep the switching process straightforward by moving to a dedicated business energy supplier who will manage everything (including contacting the existing supplier) on your behalf.

Nicky Bannister is Head of Flogas Energy

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