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Leaving the EU Energy Market

The UK may be an island but it has significant power integration with the rest of Europe. And three years on from the UK’s decision to leave the European Union, there remains much to be negotiated regarding our future power integration with Europe.

One key recent decision was the June 2018 vote on the EU Withdrawal Bill in the Commons with MPs rejecting membership of the European Economic Area (EEA). This makes the scenario of the UK remaining part of the Internal Energy Market (IEM) more distant, despite the Prime Minister advocating a close partnership.

Only Switzerland is part of the IEM while not being part of the EEA as it accepts the jurisdiction of the European Court of Justice (ECJ) and free movement of people, two things the UK government has stated as ‘red lines’ in the negotiations with the EU.

The release of a government White Paper in July aimed to provide further clarity but rather added more mud to the water with both IEM and non-IEM scenarios remaining on the table. However, the government stated it “believed” that a common rule book on climate change and wider environmental standards shouldn’t be necessary to remain as part of the IEM. The EU’s attitude towards this is unclear but does raise potential red flags towards the UK’s inclusion in the IEM if it disagrees.

Therefore although the exit from the IEM is not a certainty, and given the importance of the UK to European power market players, (and vice versa) a bilateral deal may be struck, there are political barriers which mean it is a scenario that needs planning for.

Leaving the Internal Energy Market raises questions over whether the integration of our power networks with the European mainland can be maintained to continue addressing the energy trilemma, i.e. that of decarbonisation, security of supply and affordability.