UK government considering quitting EU internal energy market

LONDON (ICIS)–The UK government is considering leaving the EU’s internal energy market (IEM) while ensuring some form of trade over interconnectors is maintained.

The revelation came in a highly anticipated white paper published on Thursday afternoon revealing the UK government’s plan for a future relationship with the EU once it leaves the trade bloc.

However, the government is intent on preserving the single electricity market (SEM) between Northern Ireland and the Republic of Ireland. The launch of the market is due later this year .

“Negotiators have already made good progress on a legal provision to underpin the SEM in the withdrawal agreement and the UK will work with the EU to ensure that the SEM is maintained in any future scenario,” the government said in the paper.

Beyond Northern Ireland, the government said it would explore several options for ensuring the rest of the UK engages in a future energy relationship with the EU. This includes the option of leaving the IEM while ensuring that trade over interconnectors can continue without automatic capacity allocation via the IEM system.

The UK will also explore the option of continuing participation in the IEM to maintain current trading practices over interconnectors while adhering to the EU rulebook on technical rules for trading such as market coupling. However, this approach comes with a caveat, which could prove a stumbling block.

“The UK does not believe that participation in the IEM should require a common rulebook on wider environmental and climate change rules,” the government said in the paper.

Continued membership of the European Networks of Transmission System Operators for Electricity (ENTSO-E) and Gas (ENTSO-G) will form part of the negotiation while the UK will attempt to ensure UK trading parties are not placed under additional regulatory burdens.

“The UK is also putting in place arrangements so that, when trading after exit, businesses will have certainty that they will not face substantially different requirements compared to their current obligations under the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT),” the paper said.

As previously indicated, the government will also seek to leave the European Atomic Energy Community (Euratom) but negotiate a new relationship with the body as an outside country.

The white paper will form the basis of the UK’s negotiations with the EU ahead of an anticipated deal being drawn up this autumn.

Experts addressing a House of Lords select committee last September expressed doubt that the UK would remain part of the IEM once it left the EU. At the time, E3G policy adviser Joseph Dutton said a devolution of legal powers to the Northern Ireland government could be required to protect Northern Ireland’s place in the all-Ireland market.