UK called to explain no-deal Brexit impact on power prices

A House of Lords committee was unsatisfied by minister Claire Perry’s testimony last month

UK energy and clean growth minister Claire Perry is asked about Brexit effects (Photo: Flickr)


The UK government is under pressure to provide more details on how a no-deal Brexit would affect power prices, carbon markets and Irish energy-sharing.

Clean growth and energy minister Claire Perry appeared before a House of Lords committee last month to talk about the impact of an abrupt exit on the UK’s energy supplies, carbon pricing and research for energy innovation.

But her answers were incomplete, Liberal Democrat Lord Robin Teverson, chair of the sub-committee on EU energy and environment, said in a letter to Perry published on Wednesday.

The UK government has made clear that a no-deal departure would pull the country out of the European Union’s internal energy market, with which it shares electricity and gas interconnectors. Asked how this would affect consumer energy prices, however, Perry failed to answer, Teverson wrote.

“We are disappointed that you were not able to respond on this issue, and we are concerned that the government may be making decisions without having fully considered their potential impact on consumers,” he said. “We therefore restate the question.”

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Similarly, Perry failed to provide “concrete information” on the progress in talks between London, Dublin and the European Commission to ensure that the single electricity market on the island of Ireland remains intact even without a withdrawal agreement, the letter stated.

Instead, she said only that there is “a growing sense of confidence that that market will be maintained”.

The government’s intention to maintain the Irish single market, however, could be complicated by its separate plan to impose a national carbon emissions tax on Northern Ireland, the letter noted.

Northern Ireland is currently exempt from the UK’s floor price of CO2 emitted from power plants, because it would otherwise distort prices on a market shared with the Republic of Ireland. But if the UK leaves the EU’s emissions trading system (ETS), the government plans to immediately replace the carbon market price with a tax.

“You yourself acknowledged that ‘there is an argument that carbon pricing would hinder, in the short to medium term, the effective functioning of that market,'” Teverson said. Perry’s comment, that the issue will need to be considered, is not satisfactory, he said, asking for clarification.

Brexit: What it means for UK-EU energy trade

The House of Lords committee also wants more answers on how an abrupt departure from the EU ETS would affect carbon pricing in the country and on the continent.

The government said in its 2018 budget late last month that it would immediately impose a domestic tax of £16 per tonne on CO2 emitted from all stationary installations that currently trade on the EU market. “On what basis was that value selected?” Teverson asked. “And is there any intention for it to be adjusted over time to mirror the EU ETS carbon price?”

He also expressed concerns about a letter the Scottish and Welsh governments wrote to London in October, saying they would object to replacing a carbon market with a tax and asking for ministerial talks.

“This disregard strikes us as extremely concerning,” Teverson said, and asked if further discussions with Cardiff, Edinburgh and Belfast have taken place and whether there is progress on reaching a deal. Jonathan Holyoak, Perry’s director of EU energy and climate change, told the committee during the hearing that business, energy and industrial strategy department had discussed the issue with the devolved governments.

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The department is currently working on 73 exit issues, of which one of the trickiest is preparations for leaving the EU’s internal energy market, Perry said during the hearing. While British regulators and operators can prepare new UK access rules to make sure trading continues despite a no-deal exit, it is up to other countries to set rules on their side, she said.

Prime minister Theresa May is meeting with cabinet ministers on Wednesday evening to discuss a Brexit withdrawal agreement reached on Tuesday. However, it still faces strong opposition from both the leave and remain sides of the parliament.

Climate Home News’ reporting on Brexit is supported by a grant from the European Climate Foundation. Please read our editorial guidelines for more details.

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