EU, UK 'May Co-operate in Energy Post-Brexit' : Research

The UK's withdrawal from the European Union will cut it off from the benefits of security of supply that the EU's internal energy market is intended to guarantee; and also deprive it of the ability to influence the rules of that market, an academic argues in a paper published July 31. And in the face of falling domestic production, the UK will likely become more dependent on imported LNG, exposing it to greater global price competition and volatility, says Michael Bradshaw of the Warwick Business School.

With the government and energy regulator Ofgem both opposed to intervening to build storage to replace the decommissioned Rough storage asset, there will be less flexibility to cushion the blow of a future supply failure; but "the reality remains that a gas supply emergency and high prices are political problems." As he concedes elsewhere, it is higher prices that have the best hope of triggering storage investment.

However he argues that both sides have an interest in continuing their close co-operation after the UK has left, in the process that is expected to start next March, not least because of UK investment in infrastructure: "The resilience of the UK’s system has wider implications for EU gas security as it serves as a western gateway for Norwegian gas and LNG to enter the European market; and Ireland is dependent on supplies through the GB network."

This means that for the EU, as much as the UK, there is good reason to reach an accommodation whereby the UK remains fully integrated with the internal gas and electricity markets.

In his position paper Future UK Gas Security, however he argues the medium-term prospect of higher UK import dependency and the longer-term prospect of falling demand will make it difficult to take final investment decisions in the supply chain to maintain UK capacity, let alone deliver new sources of flexibility. "Gas will continue to flow post-Brexit, but consumers may have to pay more for it to guarantee security," he says; while in the longer term, if the government fails to provide a clear roadmap for the role of gas in the low carbon transition, gas security will be threatened.

Bradshaw's paper pulls together insights from the presentations and discussions at three gas security forums and a conference funded by the University of Warwick, to help inform the Brexit negotiations and the formulation of a post-Brexit UK energy and climate change strategy.