Utility Week

UTILITY WEEK | 16TH - 22ND MARCH 2018 | 9 Policy & Regulation discussed that will have a significant bearing on British interests. Froggatt says: "The idea that we will leave and then they will reform the institutions is debatable. Even if they wanted to let the Brit- ish in, they would have to change the basic legislation to enable that." The exception could be the all-Ireland energy market, which Lord Teverson believes is nearly impossible to disentangle from the EU's IEM. "Something may have to give on the EU side over Ireland," he says. More broadly though patience in Brussels is running thin with the British, warns John- ston, who went to a speech a fortnight ago by Tony Blair in the Belgian capital. While on this side of the English Chan- nel, the former prime minister is regarded by many as a euro-fanatic, his message that in order to accommodate UK concerns the EU needs to reform itself went down poorly. Interconnectors The most visible manifestation of the UK's existing relationship with the rest of the EU is the growing network of interconnectors. Experts agree that trading in energy will continue across the existing interconnectors even if the UK crashes out of the EU without a deal. Existing projects, like the intercon- nector being developed along the route of the Channel Tunnel, will continue, accord- ing to Yeo, who is on the board of that pro- ject's backer Eurotunnel. But prospects for future projects are dim, he warns: "It will certainly kill off any new interconnector projects if it's not clear we are going to stay [in the SEM]. It will be very hard to get investment in new ones." This is the kind of hard truth about the UK's broader economic prospects post- Brexit, which May was groping towards at Mansion House. Yeo is frustrated that the prime minis- ter didn't spell out this message during her first Conservative party conference speech as prime minister in 2016, when the she was streets ahead in the opinion polls and had ample political capital. "It's the speech that she should have made to the Tory conference in October 2016: it would have been a dose of realism about what awaited us." Lord Teverson says that currently the nature of the UK's relationship with Euratom is the focus of more parliamentary scrutiny than the IEM. However, if the message gets out that quitting the IEM will push up energy prices, it may fuel buyer's remorse in some minds about the direction of Brexit. He says: "It's something that affects peo- ple in normal life and may make people ques- tion whether it's going to be really worth it." Why energy needs a Brexit strategy A mong the acres of newsprint and hours of coverage and speculation about the UK's departure from the European Union, it's probably fair to say that energy issues haven't featured too prominently. If you're a glass-half-full person, this probably reflects the pretty clear consen- sus across the energy industry that the extensive links and co-operation that have been built up over many years between the UK and Europe have been mutually beneficial – the latter point being a particular cause for cautious optimism as we work our way towards a post-Brexit world. There are probably other sectors and issues where there's a far greater diver- gence (to use a currently popular term) of views. We believe it's vital to maintain somehow links and relationships that have benefitted UK consumers and busi- nesses by helping deliver affordable energy, security of supply and emissions reduction. Encouraging It was therefore encouraging to hear the prime minister earlier this month state that in the coming negotiations she would be looking to secure broad energy co- operation with the EU, including protecting the single electricity market across Ire- land and Northern Ireland, exploring options for the UK's continued participation in the EU's internal energy market (IEM) and a continued close association with the Euratom nuclear co-operation arrangement. These are all key requirements that we have been pushing for on behalf of the industry But consensus, although definitely a positive, doesn't remove the pressing need for action nor reduce the challenge and complexity of achieving these goals. The transition period could provide important breathing space in resolving some of these issues – which will require extra time and, for example, allow energy trading to continue under existing IEM rules aer March 2019 to avoid us stepping over the infamous cliff-edge. As an essential product for consumers, businesses and the UK economy, it's widely and rightly acknowledged that energy must be a priority in the ongoing negotiations with the EU. We believe that continuing the efficient trading of elec- tricity and gas – the importance of which has been amply illustrated this month – the smooth functioning of energy markets and co-operation on combatting climate change will require a full and comprehensive chapter in any such agreement. Any number of proposals on our future relationship with the EU have been mooted, but it should be stressed that replicating, for example, a Canadian-style trade agreement will fail to address these issues in what is – aer all – an unprec- edented situation. Influence Membership of key EU bodies has given the UK the influence and ability to shape energy policy and regulation across Europe, including issues such as reducing emissions. If the terms of our exit preclude membership of these bodies, along with the internal energy market, then we need to see how we can maintain active participation to continue the benefits close co-operation have brought. We also need an urgent decision on whether we continue participating in the EU Emissions Trading Scheme – something we would support, certainly over the next few years – as crucial to keeping up the pace of decarbonisation, of which the UK has been a leading proponent. Climate change is evidently unconstrained by borders – virtual or otherwise. Achieving the outcome we all want presents any number of challenges but I remain cautiously optimistic that a pragmatic and flexible approach on both sides, keeping in mind the mutual benefits that will result, can achieve all this. But get- ting there will require a lot of hard work from all of us, both in the UK and the rest of Europe. I am committed to working with my colleagues across Europe to ensure consumers get the best energy deal. Opinion Lawrence Slade Chief executive, Energy UK

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