THE Government’s Chequers plan to maintain “continued and broad co-operation on energy” with the EU after Brexit should concern those who hoped to see the UK deliver more secure and cheaper energy in the future. The proposals as they stand are dangerous, unaccountable, expensive and risk undermining Britain’s security of supply and competitiveness after Brexit.
Since 2000, EU diktat has forced the UK to close over 15 large power stations and build thousands of wind turbines and solar panels to generate electricity. Though many of the older and polluting power plants would have closed over time regardless, this should have been done when the market was ready to replace their contribution.
The dash for renewables has led to empty Whitehall budgets, rising and erratic consumer bills and the absurdity of the National Grid struggling to cope with long bouts of wind-free days, alongside high electricity use. During the summer heatwave, electricity generated from wind was 30 per cent lower than the same period last year, as high pressure wind-free days exposed the sector’s near 9,000 turbines.
Perhaps renewables are important for the future, but they should be proportionate to a balanced energy portfolio in the national interest. It was gas-fired plants and ageing nuclear reactors which met the soaring demand.
Remaining aligned with EU energy policy, as set out in Chequers, will entail a series of important concessions and cross-Channel energy supply commitments which will primarily benefit the European market and its generators. These include proposals from the European Commission for the mandatory sharing of gas supplies. This could lead to gas rationing in the UK following a severe weather front in Europe alongside a gas supply crisis there. This drive for more interconnection on gas and electricity is a leading pillar in the EU’s new ‘Energy Union’ proposals. New renewable energy targets for 2030 are also being finalised on top of those which we have wrestled with for years – and accepted – at a huge cost to British consumers and energy intensive industry.
The closure of old coal, oil and nuclear power stations left a gaping hole which has been increasingly filled by new undersea cables, known as interconnectors, to import more and more EU electricity, nearly eight per cent of UK electricity this year and growing. In September, Theresa May pledged to ensure “that we see an increase in the number of interconnectors with Europe”.
This is the wrong policy in the current context because older fossil fuel and nuclear power plants across Europe are closing. This means that the spare electricity generation margins in these countries is falling and the excess electricity which will be available to supply the UK becomes limited and in some cases non-existent.
Consequently, as margins get thinner and supplies more scarce, prices will rise. More interconnection is the wrong strategy for post-Brexit Britain – new gas-fired power plants at home, embracing smart technology, renewable storage and digitilisation must be the new priorities.
This will strengthen the UK’s status as having grown low-carbon power while slashing carbon emissions faster than any other member state has in the last 20 years, whilst retaining security of supply.
Britain will need to become more competitive after Brexit and lower energy costs will be crucial. Over the last six years EU manufacturing has seen the highest increases in energy costs relative to those of the US, China and Japan. End user gas prices are now nearly twice as high in the UK than in the US. The European Commission accepts that medium-sized companies in the EU pay about 20 per cent more for their electricity than companies in China and about 65 per cent more than companies in India.
A disturbing and vaguely presented point in the Chequers proposal is for the UK to remain committed to regulatory EU environmental standards through a ‘non-regression requirement’ and that the UK would not let standards fall below ‘current levels’. To many this is regarded as unclear and probably deliberately so; but it should be assumed that it involves continued alignment with existing and future higher mandatory targets for renewables and full compliance on new directives, including interconnectors. This goes to the heart of the criticism facing the Chequers proposal; the UK would become an EU rule taker without any ability to influence those rules in the future.
An independent energy policy is one of the key tools to help make the UK more attractive to global investors after Brexit. The proposal as it stands leaves us entangled in poorly designed EU climate change policies that suit Germany, but no one else. By dumping such policies we could avoid the absurd costs that fundamentally undermine any prospect of a more competitive future.
Tony Lodge is a Research Fellow at the Centre for Policy Studies and author of ‘The Hidden Wiring – How electricity imports threaten Britain’s energy security’.