How will leaving the EU affect the UK energy market?

Energy Management’s Senior Energy Consultant, Malcolm Barrington, gives his verdict on what the immediate energy landscape may look like following the United Kingdom’s departure from the European Union on 31 January, 2020.

We do not expect Brexit to have a dramatic impact on the energy industry overnight. This is principally driven by the ongoing progress of change following the conclusion of the “Electricity Market Review” and the UK’s drive to renewable energy generation.

The UK has already effectively phased out coal from our generation mix, and offshore wind is currently the flagship of our decarbonisation strategy. This has resulted in the UK Green House Gas Conversion Factors for Company Reporting reducing from 0.41205 CO2e/kWh in 2016 to 0.2556 CO2e/kWh in 2019.

A Brexit deal is likely to ensure that we remain in the European carbon market, (EU Emission Trading Scheme ) until at least the end of 2020. This is a bullish driver for EU ETS allowance prices, and for the market as a whole. All the uncertainty surrounding Brexit last year led to no auctions of UK-issued carbon allowances. The allowances will now need to be traded, along with the 2020 allowances, and the flood of UK-origin ETS allowances may at least temporarily depress carbon prices in the EU.

We are closely watching the future of Hinkley Point’s new nuclear power plant build. The agreed price for electricity generated at Hinkley Point is twice the price of energy generated from offshore wind. We believe that Hinkley Point electricity should be subject to a renegotiation and failure to do this could possibly lead to the project being cancelled.

To talk to any of our team about this issue or any other matter relating to energy procurement and water management, please give us a call on 01225-867722.