The UK Government’s Brexit White Paper – a focus on energy

Posted in Energy

The UK Government’s Brexit White Paper, published on 8 July, provides little clarity on the UK’s policy for future energy relationship with the EU post-Brexit. Indeed, very few pages of the White Paper are dedicated to energy matters.

However, policy is clear in two respects. Firstly, the Government is committed to maintaining the Single Electricity Market (SEM) across the island of Ireland. Indeed, provision for this is already under development in the draft Withdrawal Agreement as noted in our updated Energy and Brexit Q&A. Secondly, the White Paper stresses that industry will not face substantially different requirements compared to their current obligations under the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT). Both of these commitments will be welcomed by industry.

However, there is continued uncertainty regarding the UK’s future arrangements for trading energy. The White Paper explores both options of leaving and remaining in the Internal Energy Market (IEM). If the UK were to leave the IEM, the White Paper asserts that the Government will explore what is required to ensure that trade over interconnectors continues (albeit without automatic capacity allocation via the IEM system). If the UK were to continue to participate in the IEM, then here, as elsewhere in the White Paper, the Government asserts a common rulebook with the EU would be needed on the technical rules for trading as well as a consistent approach to carbon pricing. In this context, the White Paper opens the possibility of remaining in the EU’s Emissions Trading System but asserts that a common rulebook on wider environmental and climate change rules would not be required.

A desire to continue international trade in energy is also apparent in two further aims expressed in the White Paper. The UK wants to explore the options for continued Transmission System Operator participation in the Inter-Transmission System Operator Compensation Mechanism, a mechanism which compensates transmission system operators for the cost incurred by national transmission systems due to the hosting of cross-border flows of electricity. It will also explore continued membership of the European Networks of Transmission System Operators for Electricity (ENTSO-E) and Gas (ENTSO-G), bodies which work towards the integration of European energy markets and play a central role in drafting the European network codes.

So whilst there is not much detail in the White Paper on energy policy, what is included appears to be seeking to maintain trading relations with European energy markets.

For information regarding the Government’s ambition in relation to the future relationship relating to the civil nuclear sector please see our blog post “Brexit and nuclear – important steps towards a new framework”.

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