Keeping on the Lights After Brexit – the Impact on Electricity Prices

People joke that, if a no-deal Brexit is to happen – or any type of Brexit for that matter – the lights in their homes may have to go out. This is because the UK is quite reliant on the European Union in terms of gas and energy imports.

For example, the UK imports around 12% of its gas and 5% of its electricity via four interconnectors that connect it to mainland Europe. Even though eight more interconnectors are planned for the future, it is believed that they’ll come with energy prices that will affect both the public and the private sectors.

Let’s see exactly how Brexit will impact the country’s electricity prices!

The Internal Energy Market

As you may know, the UK is part of the Internal Energy Market of the EU. Even though this market was built as a competitive one, with plenty of competitors, the UK has transitioned from monopoly to oligopoly only – the Big Six.

On top of that, this market also allows the trading of electricity and gas tariff-free across Europe.

Naturally, it goes without saying that, if the UK leaves the European Union, consumers will be faced with much higher energy bills as the country will no longer enjoy tariff-free energy trading.

1. EU’s Stand on Tariffs

When it comes to third country exports and imports, the EU states that a transmission system use – namely, the use of the interconnectors – must be paid on all scheduled imports and exports from the third countries that have not adopted a certain agreement and are subject to EU law.

2. UK’s Stand on Tariffs

If a no-deal Brexit happens, the plan is to establish a temporary tariff regime. This regime would apply for a maximum of 12 months during which a full consultation, review, and approach will be undertaken.

This temporary tariff regime will also imply that any electrical imports would be considered as tariff-free.

As you can see, the UK does have a plan to keep its citizens’ lights on after Brexit. However, their plan can last only a year – and, as with everything related to Brexit, the future is marked by uncertainty.

The Main Factors

As EnergySeek reported, there are a couple of factors that threaten the UK’s lights.

Although the strength of Brexit’s impact on electricity prices cannot be determined, it is clear that the following will definitely impact the prices in question:

1. The fact that the transportation costs for energy will increase, due to tariffs set by the EU. On top of that, the EU investment will be reduced as well.
2. It will be very hard, if not impossible, for the UK to find a proper replacement for Euratom – the European Atomic Energy Community.
3. Brexit will also force the UK to leave the EU ETS – EU Emission Trading System. This will increase the country’s carbon tax significantly.

The Bottom Line

Obviously, you won’t have to keep the lights off even when you need them after Brexit, but you will surely be more conservative once faced with the consequences.

As mentioned above, these consequences are yet uncertain – but an increase in electricity prices is sure to happen. We have the tariffs on the use of interconnectors, then the higher carbon tax, and lastly the fact that the UK will still have to import energy to meet the demand.

Overall, people strongly believe that energy prices will increase after Brexit!

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.