The UK Government published its White Paper on The Future Relationship between the UK and the EU on 12 July 2018. In that White Paper, the UK Government reaffirmed its commitment to broad cooperation on energy post Brexit, but there continues to be real uncertainty as to the form that this cooperation will take.
On the one hand, the White Paper contemplates the UK leaving the EU's Internal Energy Market (IEM), but somehow ensuring continued energy trade over our inter-country interconnectors without automatic capacity allocation via the IEM system.
On the other hand, the White Paper contemplates the UK continuing to participate in the IEM, using a common rulebook, to preserve existing trade over the interconnectors.
In effect, that means that all options for continued cooperation remain on the table and worryingly there is no indication of the UK’s preferred option, how it would work or the extent to which there is any sort of EU buy-in to the proposals.
One thing is clear: the UK is committed to maintaining the Single Electricity Market (SEM) in Ireland “in any eventuality” given the wider issues around the creation of a hard border on the island of Ireland. How this will play with the Democratic Unionist Party, which holds the current balance of power in the UK parliament, if the UK leaves the EU’s Internal Energy Market (and therefore has a different deal to the Irish energy solution) remains to be seen.
There is also greater clarity on climate change. The White Paper confirms that the UK’s world leading climate ambitions are set out in domestic law and are more stretching than those that arise from its current obligations under EU law. It commits the UK to maintaining these high standards post Brexit.
The market expects power and gas to continue to flow between the UK and the EU27 post Brexit, but there is, as yet, no clarity on how this will work, how frictionless these trades will be and whether the result will be increased energy prices or energy price volatility.
Don’t forget, this all assumes that a “no deal” crash landing can be avoided and that is by no means certain in the current political climate.