Continued energy cooperation should be a key feature of upcoming Brexit negotiations

Ahead of the first year anniversary of the UK’s Brexit referendum, EURELECTRIC, the association representing the power industry in Europe, is issuing its analysis paper “Brexit: Maintaining free and fair trade of electricity and gas in Europe”. Given the crucial importance of energy for both economies, EURELECTRIC believes cooperation between the UK and EU on energy matters should continue to be aligned as closely as possible: the paper  indicates the critical points that need to be considered.

The development of the internal energy market (IEM) has had significant benefits for consumers in both the EU and the wider European Economic Area, including those in the UK. It has enabled available resources and capacities to be shared across borders to reduce costs, improve security of supply and better integrate renewable electricity.

Overall, it is in the interest of customers, Member States and industry to maintain the integration of the energy markets to the widest possible extent and to minimize barriers to trade in energy. “Ease of access to secure, sustainable and affordable energy is critical for all economies and every effort should be made to minimise disruption of these objectives in the upcoming negotiations on the UK’s withdrawal from the EU” says Kristian Ruby, EURELECTRIC Secretary General.

When setting the terms of reference and evaluating the next steps, the paper highlights the importance of Brexit’s impact on the following areas: the IEM; the Single Electricity Market on the island of Ireland; the EU energy and climate frameworks including the Emissions Trading Scheme (ETS); the Euratom Treaty and Community; trading (hedging) within the EU Financial Regulations and Gas trading and emergency cooperation measures.

Given the physically networked nature of the energy industries, collaboration is not only desirable but is essential if these cross-border physical connections are to function efficiently and maximise the benefits for all customers and economies. To ensure the integrity of the IEM, some common rules must be adhered to by connected third countries.

In light of UK withdrawal, the EU will need to reconsider its capacity to meet energy and climate targets and, as a priority, to assess the impact of Brexit on the EU Emissions Trading Scheme (EU ETS).  We call for an agreement in principle by October 2017 for the UK’s continued participation in the EU ETS until at least the end of Phase III (end of 2020). The necessary transitional measures to resolve technical and jurisdictional issues can then be put in place. We also advocate for clarity on the UK’s participation in Phase IV (2021-30) to be agreed by October 2018  giving at least two years lead time in the event of any potential UK exit from the EU ETS  within that period.

Transitional arrangements for energy would be welcome as it is unlikely the negotiations on energy trading will be finalised within the period scheduled under Article 50. Therefore, EURELECTRIC requests early clarity on possible transitional arrangements relating to electricity trading to prevent any cliff edges that could arise.