The UK’s exit from the European Union (EU) could lead to higher energy bills, according to Energy UK, the trade association for the British energy industry, and a House of Lords committee.
The UK is scheduled to leave the EU on March 29, 2019 and as a result of this a growing number of issues have come to light. Uncertainty around the energy market is the latest issue to cause concern, with Energy UK suggesting household energy bills are likely to rise as a result of uncertainty over whether Britain will remain in Europe’s carbon trading scheme, the EU Emission Trading System (EU ETS) after Brexit. There are also problems forecast around the UK's place in the EU's internal energy market, as well as problems for the nuclear industry, should the UK leave Euratom without a suitable replacement body in place.
As things stand, the UK gas and coal make up almost two-thirds of the UK’s energy mix (30% each), while nuclear accounts for 19% and wind makes up 9.5% of energy generation. The rest is split between bioenergy, solar, hydro and other forms of generation.
How could Brexit push up our energy bills?
- A cut in EU investment
As things stand, about 5% of the UK’s electricity and as much as 12% of its gas is imported from the EU. As with all things Brexit, the UK is looking to completely cut its ties with the EU’s internal energy market, which will almost certainly weaken its influence on energy rules and mean a cut in European investment in the UK’s infrastructure.
And because the EU’s internal energy market is designed to remove trade barriers and promote frictionless trade between member states, leaving this arrangement could lead to supply shortages in the event of extreme weather or unplanned generation outages, and lead to significantly higher prices.
Lord Teverson, the chair of the EU, energy and environment subcommittee, said: “There will be a divergence and we will not be integrated. What that means is energy trading becomes less efficient and retail prices will go up.”
- Leaving the EU ETS
The UK is currently part of the EU Emission Trading System (EU ETS), an EU-wide cap and trade system which puts a price on carbon through trading of emission permits.
When speaking about the potential problems caused by leaving the EU, Lawrence Slade, chief executive of Energy UK, said: “At present, as we do not know what carbon pricing mechanism the UK will be in, the exposure to carbon costs for that period is undefined, which makes it extremely difficult to price any thermal generation and causes deep uncertainty across the market."
This is particularly true for companies that buy energy in advance to protect themselves from market volatility and wholesale price hikes. The uncertainty is already affecting the day-to-day business of energy companies, which are obliged to enable trading in their electricity several years out and from October will have to offer a market for winter 2020-21.
Although the leave date is set for March 29, 2019, Britain will remain part of the EU ETS until the current trading phase ends in 2020, but with plan in place for what happens then, there is the possibility that the uncertainty will create cost pressure that will feed through to customer bills
- No replacement for Euratom
Finally, there are the problems that could arise should the UK fail to put in place a replacement for Euratom, the EU nuclear cooperation treaty – which could have major consequences for the UK’s nuclear industry, which the government is currently throwing its weight and money behind – and Brexit could lead to a major energy crisis on all fronts.
Of course, no one really knows what the impact of Brexit will be, but therein lies the biggest problem.
At Energy Gain UK we can help you reduce the impact these prices increases could have on you. Part of your energy bill goes towards investing in renewable energy sources and funding energy improvements to hit green energy targets and meet the pollution targets set by the EU. Installing our solar panels means that you can generate your own electricity and claim a government funded FIT payment for doing so.
If you would like to know if you could save and earn if you were to install Energy Gain UK solar panels simply click here to send us a few details and we will work out how much you could save and earn.
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