With so much ongoing uncertainty over the UK’s future relationship with the European Union, energy consumers are understandably concerned about the impact on our domestic energy market.
While we cannot be certain about the final result, we can map out some likely outcomes, based on the information we currently have.
Security of supply
When it comes to security of supply, the UK imports about 46% of our energy in the form of gas, power and oil from around 20 countries, many of which are in Europe.
We also have interconnectors that transport power and gas between the UK and mainland Europe.
So while it’s very unlikely that the flow of energy will be interrupted, it may cost more to import than under current shared EU trading arrangements.
We also have the option to import more liquid natural gas (LNG) from countries outside the EU such as Qatar. But shipping costs and growing competition from fast-developing parts of Asia can drive prices upwards.
Cost of energy
The value of the pound also has an impact on imported power costs.
The pound has dropped by around 15% since the Brexit vote in 2016, so energy costs are already higher.
Ongoing uncertainty is likely to reduce the pound’s value further still, so expect wholesale energy costs to keep rising.
Carbon and energy reporting
In terms of carbon reporting requirements, the UK has already committed to phasing out the CRC Energy Efficiency Scheme and replacing it with the new Streamlined Energy and Carbon Reporting (SECR) framework from April 2019 – and we don’t expect this to change in the foreseeable future.
The EU Energy Savings Opportunity Scheme (ESOS) obligation is set to continue too. Although in a ‘no deal’ Brexit situation, there may be changes before the next (2023) filing deadline.
The carbon taxes currently levied on bills are expected to remain in place.
However, in the case of a ‘no deal’ Brexit, the government will introduce a Carbon Emissions Tax to ensure the UK meets its carbon reduction commitments under the Climate Change Act.
A rate of £16 would then apply to each tonne of carbon dioxide emitted over and above an installation’s emissions allowance from April 2019.
When it comes to the Climate Change Levy (CCL) and VAT, these are expected to continue. But depending on our terms of withdrawal from the EU, the same EU VAT laws may no longer apply. So we are keeping this situation under review.
For energy intensive industries (EIIs) currently claiming exemptions from the cost of the Renewables Obligation and Contracts for Difference, this is not expected to change.
However, UK plans to expand the eligibility criteria and to move from the existing compensation scheme to an exemption for the Feed In Tariff (FiT) costs have been delayed.
Assuming State Aid approval is granted, the FIT will become an exemption scheme for EIIs from April 2019.
But we are still awaiting confirmation from the Department for Business, Energy and Industrial Strategy (BEIS) about whether they will press ahead with changes to the EII eligibility threshold – and if so, when this might be introduced.
So while there are changes ahead for EII exemptions, these are not strictly EU related (although do require EU State Aid approval).
Access ongoing expertise
Our policy team is in close contact with BEIS and will be keeping up-to-date with any Brexit-related changes as they unfold. So we will keep you informed.
Existing customers can always contact your Client Lead for more information about any energy-related matter. Or any business can get in touch via nBS@npower.com.