Mr. Moffitt’s Profits Times – May 2018
Brexit and the Energy Market
Brexit raises a number of challenges for the energy market, The key areas being the impact on energy prices in the UK, security of supply and legislation.
The UK energy market, like other markets, is strongly affected by market sentiment and trading speculation. The value of the pound to the Euro creates opportunities for traders to speculate in UK energy markets such that when the pound is weak, traders in euros will buy UK energy, pushing prices up and visa versa if the pound is strong.
Security of supply, in particular the development of inter connector infrastructure is another concern. Currently most expert commentators do not see this as big an issue as other perhaps “sensationalists” would have it. Many projects are already committed and unaffected by Brexit. Europe also has an interest in developing the physical connections.
Perhaps more important will be the political and regulatory background. It seems likely that Britain will continue with environmental legislation along the same lines as it would whether in or out. However, politically there has to be concerns about the flow of gas from Russia to the UK via Europe if push comes to shove and Europe determine that they need this more.
In essence in the short term it seems unlikely that Brexit will have a major impact on the energy situation. It may impact our influence on elements of legislation and in the longer term it could have an impact on supply and prices depending on the affect it has on long term gas supply contracts. In particular, Brexit will add to the complexity of negotiating contracts in relation to interconnectors. In terms of price, the EU would have to apply export tariffs for there to be an impact on gas prices – this would be a political issue.
For further information, see this useful link.
“An analysis of power demand between 26th February and 3rd March during the so called “Beast from the East”, when evening peak demand hit a three-year high, exposed the country’s reliance on its biggest electricity interconnector with Europe, according to the Electricity Insights at Imperial College London.
It says electricity demand increased 10 per cent, as people used more electric heating to keep warm. The evening peak demand on 1 March was the highest in three years.”
MPS URGING CLOSE CO-OPERATION WITH EURATOM AFTER BREXIT
The Independent reports that “MPs in the House of Commons have warned that the impacts of leaving Euratom will be “profound”, putting the UK in a much weaker position.”
Euratom (European Atomic Energy Community) was set up in 1957 and is responsible for regulating the nuclear industry across the continent, disposing of waste, safeguarding the transport of nuclear materials, the mobility of workers in the sector, and carrying out nuclear research and development.
According to the Institute for Government, leaving Euratom will have three key consequences for the UK. Firstly, it will have more difficulty ensuring a long-term supply of nuclear fuel. Also, it may no longer enjoy access to nuclear research facilities and funding.
In the recent Queen’s Speech, the Government announced a suite of Brexit related legislation, including a new Nuclear Safeguards Bill. This is intended to “establish a UK nuclear safeguards regime” after leaving Euratom and delegates responsibility for this to the Office for Nuclear Regulation.