What is the future for Brexit energy prices?
At a turbulent and uncertain time for the UK with regards to Brexit energy prices and European connections, the UK’s energy system is set to become dramatically more dependent on the European Union by building new links to Europe.
Currently there are four cables, known as interconnectors, running between the UK and Ireland, France and the Netherlands and these provide around 6% of Britain’s power supplies. However, with 11 new connections under construction or in negotiation, imports could provide more than a fifth of the country’s electricity needs by 2025.
Leading the charge is the National Grid who are responsible for three of the 11 proposed cables. Jon Butterworth, who heads the group’s interconnectors business, said: “From our perspective, and from the perspective of the general public, there’s not a lot of downsides to interconnectors.”
The National Grid believes that new links will hugely benefit brexit energy prices and consumers because lower wholesale prices in the continent will lead to cheaper energy bills for households and businesses in the UK. Calculations made by the company suggest that households will save an average of £9.01 a year once the new capacity comes into fruition.
Though this may not seem like a huge reduction, it would almost completely offset the cost of Hinkley Point C, the nuclear power station that will add at least £10 to bills.
The glaring risk for these new connections is of course the imposing new Brexit negotiations which threaten the prospect of trading across borders. However, the Brexit white paper stressed the need for efficient trade across interconnectors so there seems to be little resistance at this stage.
National Grid and its European counterparts, who develop the cables through joint ventures, believe the fundamentals remain unchanged.
“When you talk to very senior civil servants [in Brussels], they say we still believe interconnectors are great things for Europe,” said Butterworth. The company believes that interconnectors are vital to make electricity networks more flexible and identify this is a priority as more wind and solar power come online.
Criticism of the new connectors come from claims that the cables could threaten energy security and would not be subject to UK’s carbon tax. There are also concerns that low wholesale prices could hurt the economics of UK-based power stations. Yet, in the main, industry experts widely agree that greater interconnection plans will benefit renewable energy plans.
What does this mean for brexit energy prices?
Frustratingly of course, it’s very difficult to gauge how these new connections will affect brexit energy prices and consumers at this stage. The energy market is highly capricious at the best of times, and with Brexit still in such an unpredictable phase, there isn’t a whole lot of solid fact to go on.
It does seem that European wholesale prices will have a long-term monetary benefit to users of electricity and gas in the UK. If the new connections are approved and driven to completion, we should be able to see some changes to rates – but by what percentage is still unclear.
However, short term effects are looking far from positive. In the coming months its reported that energy bills could well increase significantly for household and businesses. This could have a detrimental impact on the price of electricity and gas bills in the near future.
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