Brexit lights slow fuse under EU energy goals

There’s a video doing the rounds on social media that explains how the UK’s foreign policy toward Europe hasn’t changed in 500 years. It’s from a political sitcom written more than 30 years ago but still sounds plausible.

Sadly the writers didn’t imagine how the UK leaving the EU would go, so the current UK government will have to figure that out for itself. At the moment it looks like it will take at least a couple of years to get any real certainty on what the UK’s future relationship with the EU will be.

Meanwhile, it’s business as usual from the EU side on energy issues. Fears that the UK might miss out on EU funding for energy projects are so far unfounded. The UK benefited from two EU grants for electricity infrastructure post-Brexit vote in July – Eur14.82 million for the Viking Link between Denmark and the UK, and Eur8.28 million for the UK’s compressed air energy storage project at Larne in Northern Ireland.

Both of these projects are part of the EU’s Northern Seas offshore wind grid priority corridor, intended to link all the countries in the region to smooth out demand and supply variations.

As a net importer of gas and also increasingly of electricity, the UK needs these links to other countries, as we show in this video. UK power prices are likely to stay at a premium to the rest of Europe, so the business case for more links remains, as long as the UK’s policies on carbon do not change, as we explain in this pre-Brexit vote podcast.

The UK will also be included in a whole raft of EU energy proposals expected from the European Commission this year, as it is still a fully paid up EU member with all the rights and obligations that involves. The timing is awkward, as the EU is in the middle of a widespread update to much of its energy legislation, mainly to meet 2030 targets on greenhouse gas emissions, renewable energies and energy efficiency, but also to improve gas and electricity supply security.

For example, in February the EU proposed an updated EU gas supply security regulation, which included fixed groupings of countries that would have to work with each other on regional risk assessment, preventative and emergency action plans. The fixed groupings are proving controversial in the discussions among national governments, but spare a thought for Ireland, which is currently in a group with the UK and no one else.

EC's proposed gas security cooperation regions

The gas supply security regulation will probably take a couple of years to agree and be applied, by which time there should be a clearer picture of what the UK’s rights and obligations to its EU neighbors will be, but for now, the UK and Ireland have to negotiate on the regulation without knowing how the wider relationship will change.

There’s also potential for disruption on the 2030 targets. EU leaders, including from the UK, committed in October 2014 to a binding goal to cut EU greenhouse gas emissions by at least 40% by 2030. This is also the EU’s commitment under the Paris international climate change agreement, which says countries cannot reduce their commitments, only raise them. So there’s no ready option for simply scaling down the EU’s commitment when/if the UK is no longer included.

To achieve the overall 40% cut, the EU will need its member states to cut emissions in the EU Emissions Trading System sectors — heavy industry, including power generation — by at least 43% on 2005 levels and in non-ETS sectors — such as transport, buildings and agriculture — by at least 30% on 2005 levels.

The European Commission proposed in July binding 2030 national non-ETS targets for each EU country, including a 37% cut on 2005 levels for the UK. This is at the higher end of the targets, which range from zero to -40% across the 28 EU countries. EU climate action and energy commissioner Miguel Arias Canete has avoided speculating on how the targets would have to be adjusted when/if the UK is no longer taking part.

The EU’s 2030 target to source at least 27% of EU final energy demand from renewables will not be binding at national level and the 2030 target to improve energy efficiency by at least 27% compared with business as usual will not be binding at any level. The idea is that EU countries would submit national energy and climate action plans, and the European Commission would check to see that cumulatively they add up to the EU targets. So if the UK is not part of that process then the remaining 27 countries will have to do more, with implications for their energy demand and generation mix.

The European Commission is expected to propose updated EU energy efficiency legislation in October, and updated EU renewable energy legislation at the end of the year, along with new EU electricity market design proposals and updated electricity supply security rules.

The UK and the other 27 EU countries will have to negotiate the final versions of all these proposals in parallel with the UK’s exit. Like I said, awkward.

Source: http://blogs.platts.com/

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