Published on 20/10/2019
Many people in the United Kingdom are concerned what impact Brexit will have on their energy bills. With one-third of businesses identifying that energy costs are one of the reasons they are struggling to grow their business, it’s understandable for people to worry about the potential impact that Brexit could have.
One thing we don’t know – at the time of writing anyway – is what kind of Brexit we’re going to have. Deal, no deal or another referendum. What is clear is that if we do leave the EU, there’s a possibility that energy prices could be affected.
You’ll be happy to hear that there shouldn’t be disruption to gas and electricity infrastructure straight away. The UK only imports around 7% of its electricity and around 10% of its gas from the EU mainland. However, the UK government has estimated that this number could increase to 20% by 2025.
Regardless of how much energy we import from the EU, we’ll need to use the interconnectors which link the UK to mainland Europe. These are partially funded by the EU, so with eight more of them planned to be built in the future, it’s possible that the UK could have to shoulder additional costs.
Interconnectors need maintenance and can be damaged during severe weather which can lead to supply outages and loss of energy. Since the UK will no longer be in the EU’s internal energy market, the cost of fixing and maintaining them may need to be passed onto UK customers.
It’s really important to bear in mind that regardless of the outcome of Brexit, the connections to the EU network will remain, so blackouts or supply shortages are unlikely.
While the UK is in the EU, it enjoys completely frictionless trade, something that won’t exist if the UK leaves the EU and we are no longer in its internal energy market. National Grid has estimated that UK consumers could face £500m of extra costs per year as a result of being outside the EU’s Internal Energy Market.
The UK is a member of Euratom which is Europe’s nuclear cooperation agency. We can’t be sure what impact Brexit will have on our membership, however, the UK’s reliance on nuclear power means a withdrawal from Euratom could have a serious impact on the future of nuclear power in the country and could have a negative impact on our ability to balance demand, increasing energy costs, particularly at peak times.
The cost of importing gas and electricity will be impacted by the value of the pound. Although 10% of our gas is imported from the EU, a further 30% is imported from outside of Europe, predominantly from Qatar, but also from places such as Algeria, the Dominican Republic and the USA.
This reliance on international imports means fluctuations in the value of the pound could have a significant impact on the cost of energy for UK customers.
So, what do we think the impact will be?
The short answer is that no one really knows. Yet.
What we’ve set out in this article are things which could happen, but there are no guarantees that they will and until the final Brexit deal is set out in detail, we’ll be unable to understand how it’s going to affect the energy market.
There could be little or no impact at all, however, it’s a good idea to try to be prepared for all outcomes.
What can customers do to prepare for Brexit?
Make sure you pay attention to when your energy contract renewal date is and if you are ready to renew, shop around to find the best deal possible. Signing up for a fixed-term contract will mean your rates are fixed for a set period, meaning you’ll know what prices you’re paying despite the uncertainty in the energy market.