What does the UK General Election result mean for Brexit and energy policy?
Posted in Energy
Now that the Conservative minority government has shaken hands on a “confidence and supply” agreement with the Democratic Unionist Party (DUP), including provision of an additional £1 billion of funding for Northern Ireland, the DUP’s priorities for the EU exit deal may influence negotiations (see our recent blog post on the UK General Election Result – implications for Brexit) and mean that Northern Irish issues are pushed up the policy agenda. Although the DUP supports Brexit, Northern Ireland voted by 56% to remain in the EU and as a result the party has adopted a softer approach to Brexit.
In relation to energy, Northern Ireland currently forms part of the Single Electricity Market (SEM), a single wholesale market for electricity operating on the island of Ireland. The SEM is undergoing reform as part of the further integration of European energy markets and implementation of the EU network codes. The reformed Integrated Single Electricity Market (I-SEM) is expected to be in place by the end of 2017.
Natural gas has only been available in Northern Ireland since 1996, via an interconnector with Scotland, and as such remains a relatively young market. It was previously identified as a priority for development in a country where 70% of households use oil for heating, and the Northern Ireland Executive have identified expansion of the natural gas network as critical for achieving two of the key objectives in the draft 2016-21 Programme for Government - the need to promote a secure, sustainable and cost-efficient energy supply (Outcome 1) and the need to reduce greenhouse gas emissions (Outcome 2).
Security of energy supply has been earmarked by the DUP as a key Brexit negotiating priority. Bearing these aims in mind, it will be interesting to see whether any of the £400 million (out of the £1 billion funding mentioned above) earmarked for infrastructure development for Northern Ireland will be allocated to expansion of the gas and electricity networks, particularly given that the 2017 DUP election manifesto also identified development of new generation capacity (in order to secure supply of electricity) as an aim it would support.
Also high on the DUP’s list of Brexit priorities (as outlined in their 2017 election manifesto) is energy market stability, continued progress on the I-SEM and greater interconnection with both Great Britain and the Republic of Ireland, including explicit support for the North South electricity interconnector. The DUP might be expected to be resistant to tariff barriers which might increase the cost of energy for consumers, although Nigel Dodds, the DUP’s Westminster leader, is of the view that Northern Ireland must leave both the single market and the customs union, along with the rest of Britain.
The Conservative government are similarly concerned that interconnection and market operations are not disrupted. The Conservative government’s Brexit White Paper recognised the importance of the issue, stating that they “are considering all options for the UK’s future relationship with the EU on energy, in particular, to avoid disruption to the all-Ireland single electricity market operating across the island of Ireland, on which both Northern Ireland and Ireland rely for affordable, sustainable and secure electricity supplies”.
Whilst one may conclude that the DUP’s influence may result in a softer Brexit from an energy perspective, both the Conservative and the DUP policy is to end the authority of the Court of Justice of the European Union and repatriate regulation to the UK. It remains to be seen how arrangements can be structured to enable the Republic of Ireland to comply with EU laws but Northern Ireland to be free to legislate.