ESRI (2) Energy and climate policies need Brexit-proofing

Ireland has had an all-island single electricity market (SEM) since 2007, which is part of the wider EU Internal Market for Electricity, as is the electricity market in Britain. According to the Economic and Social Research Institute in a new research paper, the SEM is underpinned by legislation ” enacted under the framework of the 2006 Memorandum of Understanding between the Governments of Ireland and the United Kingdom”, so its existence should not automatically be called into question as a result of Brexit. Indeed, both governments have said it should be retained, but new legislation would be necessary if it were no longer to be part of the EU Internal Market for Electricity (IME).

There is a good case for the UK remaining in the IME, as well as some precedent. However, should it not do so, problems could arise for the SEM in Ireland and how it relates to the IME. “There could be implications for the ease with which the SEM participates in the EU electricity market should Great Britain cease to be a full participant. In particular, without common rules for the trading of electricity over inter-connectors, there is potential for perverse interconnection flows, where electricity flows from the expensive region to the cheaper region, rather than the other way around. Ending such perverse flows is a major aim of the European electricity market.”

Ireland and the UK are both net energy importers, so  there is a clear common interest in maintaining the status quo. The UK also has to decide whether it will stay in the EU gas market – staying in one without the other is unlikely, the research paper says.

As in other matters of infrastructure, the big issue is that Ireland is indeed ‘an island behind an island’; Britain is its only physical link to the IME.  EirGrid and its French counterpart are currently exploring the possibility of an electricity interconnector between Ireland and France. The advice of the ESRI is to take this opportunity to reformulate energy policy, but not to be driven by Brexit alone.

“When it comes to energy and climate policy, policymakers should focus on the key issues (competitiveness, carbon pricing and taxation and infrastructure) rather than concentrating to an excessive degree on issues arising from Brexit, which may prove peripheral in determining the degree to which the energy sector impacts on the welfare of the Irish people.