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Four years after the European Union (EU) referendum the UK left the EU and its Single Market on 31 December 2020. The relationship is now governed by the Trade and Co-operation Agreement (TCA) agreed between the UK Government and the EU Commission on 24 December 2020. Northern Ireland’s unique relationship with the rest of the UK and the EU was settled when the Ireland/Northern Ireland Protocol was formally agreed on the 17 December 2020.
Given that the TCA and the Protocol were put in place at such a late stage, mere days before the UK’s exit from the EU, the public, business and commentators had little time to evaluate what the impact of Brexit would actually be, and just over a month on from the UK’s exit some of the implications are beginning to be felt, especially on the shelves of supermarkets in Northern Ireland.
The difficulties and complications experienced in the trade in goods are well publicised, but what are the implications for energy, particularly the supply of electricity to consumers in Northern Ireland?
Single Electricity Market
Whilst the rest of the UK has now left the EU’s Single Market for Energy, Northern Ireland’s electricity market will continue to operate as part of the Single Electricity Market along with Ireland. The Single Electricity Market recently became fully integrated with the electricity markets of the other EU Member States (as had the rest of the UK until its withdrawal from the EU) and the Northern Ireland Protocol recognises the need for the EU regulations that underpin the operation of the Single Electricity Market to continue to apply in Northern Ireland.
Connection with GB and Europe
Of course, both Northern Ireland and Ireland are connected to Britain by electricity interconnectors; the Moyle Interconnector between Scotland and Northern Ireland, and the East West Interconnector between Wales and Ireland, which enable electricity to flow between the island of Ireland and Britain. This interconnection is vital, not only to give Ireland and Northern Ireland access to surplus electricity from Britain but to allow excess electricity generated in Ireland, particularly wind energy, to find a market in Britain.
Due to the fact that Ireland presently has no connection directly to the rest of the EU market (pending the construction of the Celtic Interconnector between Ireland and France, which is expected to be commissioned in 2026), the electricity interconnection with Britain is the only means by which Ireland can access the EU market and as part of the TCA it was agreed with the EU that the UK Government will “take all possible measures to maintain” the Single Electricity Market.
Despite this, by reason of leaving the EU, the trading of electricity over the interconnectors, whether between Northern Ireland and Britain or between Britain and the EU, is no longer carried out according to a single set of rules, has lost efficiency and caused costs to increase. This interconnector trade is not covered by the Northern Ireland Protocol; instead, the TCA provides that new arrangements must be put in place by April 2022. In the meantime, day-ahead trading of electricity over the interconnectors is continuing under arrangements made as part of the no-deal Brexit planning by System Operators. It is expected that putting in place the new arrangements for market coupling which will allow for efficient interconnector trading of electricity will be highly complex and the April 2022 deadline will be challenging.
Northern Ireland will have a unique place in both the UK and Europe due to the arrangements agreed in the Northern Ireland Protocol and the TCA, particularly in relation to its electricity market. Energy policy is a devolved area of government which is the responsibility of the Northern Ireland Assembly and at present the Department for the Economy is creating a new Energy Framework for Northern Ireland following on from the 2010 Strategic Energy Framework. With a separate electricity market from the rest of the UK this must be an opportunity to introduce bold and ambitious policies and investment in the electricity system to facilitate the achievement of a net-zero carbon economy in Northern Ireland.
In the context of Northern Ireland’s work to develop a new energy policy, the Economy Minister Diane Dodds has publicly stated that “the clean energy sector in Northern Ireland, and renewables in particular, continue to be one of our highest priority areas for addressing climate change and delivering green economic recovery”. Brexit should not impede this objective, but work will be needed to restore the mechanisms to ensure the most efficient use of the interconnectors that connect to the international energy markets.
This article has been produced for general information purposes and further advice should be sought from a professional advisor. For advice or information, please contact our Energy & Renewables team at Cleaver Fulton Rankin.