In or out? Why those steering Europe’s single energy market might pay attention to the UK’s EU referendum debate

Admin

SHARE THIS STORY

Being a UK-based company, the news schedule my colleagues and I at ICIS are exposed to away from the work place has already been dominated for weeks by the UK’s EU referendum, despite the vote being four months away.

The issue at the heart of this debate strikes a chord with the key issue that has underpinned the energy news agenda during the seven years I have been writing about the power sector: Europe’s push towards a single energy market.

In simplified terms, the UK has called its EU referendum because problems associated with a policy of integration – economic, social and cultural – are perceived by some, rightly or wrongly, to outweigh the benefits.

Today, parallels can be drawn between the referendum debate and the single energy market project, while at the same time contrasts also exist. And from this we can learn a thing or two about the single market project, and how to ensure the countries of Europe eventually find themselves ‘in’ a single energy market, as opposed to ‘out’.

The parallels are self-evident: the principle of union, of working together for a common good, of leveraging economies of scale to achieve an end – low carbon and secure energy – at the least cost.

But contrasts exist as well: while the UK’s referendum debate is by its nature framed by national politics and internal interest, a well-functioning energy market is an international issue: European nations buy fossil fuels on a global market; the most efficient place to produce renewable power is often hundreds of miles away, across borders, from the largest source of consumption; carbon emissions occur at a single power plant but the long-term impact is as global as it gets.

Fractious

One thing the constant drip of referendum news exposes daily in the UK is its often fractious relationship with the EU, which is where broad lessons that relate to the single energy market can be learned.

Just as it has been proven to be dangerous for the EU to turn a blind eye to the disparate nature of its economic make-up, the single energy market ignores the inherent differences in national energy systems at its peril, and in some areas, the strain has started to show.

For example, France says it needs an electricity capacity market, but Germany plans to proceed without. The range of different designs of such mechanisms, and how they might fit into a single market, triggered an in-depth EU investigation last year.

The UK sees intervention as a necessary means of safeguarding energy supply, hence the state underwriting of a giant nuclear power plant. Germany however, which is permanently exiting atomic power, maintains faith with market forces.

What will surely emerge will be a disparate patchwork of national energy market designs, linked in places, but only where possible. If those overseeing the drive for a single market attempt to force integration, the project may face insurmountable difficulties, with national governments deciding instead that energy security is best dealt with unilaterally.

So here, measured and considered integration is key. To avoid its component states finding themselves pushing to be ‘out’ of a single energy market, the EU’s grand project must be developed slowly, gradually, and with regard to differences in national systems. This means it will look very different from the initial one-size-fits-all intention, but energy will never be a one-size-fits-all issue.

Yet energy issues do remain best dealt with internationally. Whichever way the UK votes in June, the principles of union and togetherness do have their place in 2016. The energy sector, and the benefits that a single market can bestow if developed with the necessary patience, should eventually provide evidence of that.

PREVIOUS POST

ACER looks to form group on energy derivatives

21/07/2015

EU regulators agency ACER is looking for people to form an ad-hoc expert group o...

Learn more
NEXT POST

Gas industry struggles to prepare for changing rules amid tariffs storm

04/03/2016

Knowing how to prepare for going outside during winter months feels, at times, i...

Learn more
More posts
Clock is ticking on MiFID II
02/02/2017

Time is running out for energy companies that have to work out if they will be included or exempted ...

Read
No alternative: Europe’s low-carbon energy transition will come of age in 2017
25/01/2017

“Alternative energy”. Is that still a common phrase? In some quarters, it is. In a recent New Yo...

Read
Should the EU get tough on the gas network codes?
10/11/2016

Following the recent publication of the EU Agency for the Cooperation of Energy Regulators’ (ACER)...

Read
2016 – for LNG it was the year that wasn’t
24/10/2016

The long-awaited surge of new global LNG production has not led to the widely-expected and sustained...

Read
Ballast bonuses sink shipping activity
26/09/2016

The cancellation of two planned LNG vessel charters in Europe this week shows that it’s becoming h...

Read
A crazy week in UK power. But will the madness return this winter?
22/09/2016

In recent days, UK power has been a crazy energy market to trade in. Late in the day on 14 September...

Read
What’s in a name? That which we call a Bulgarian hub
13/09/2016

Bulgaria and the European Commission have recently been announcing, with much fanfare, the country i...

Read
This winter it really is about the weather
02/09/2016

The cliche about weather driving energy prices, in particular on European gas and Asian LNG, is just...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more