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Britain’s energy infrastructure at risk from Brexit

One of the more mendacious claims put out by the Vote Leave campaign in the run up to the Referendum on 23 June was that Britain’s energy bills would come down.  This was always a flaky claim given that the world is still heavily dependent upon fossil fuels, and that the cost of extracting coal, gas and oil has been rising steadily since 2005.

In fact, energy bills are going to go up within weeks of the Brexit vote for the simple reason that Britain ceased being a net exporter of oil and gas in 2004, and its dependence on imports has been growing steadily ever since.  The fall in the value of the Pound means that the wholesale cost of imported energy – which is traded in US Dollars – will go up accordingly.  And given the past performance of the big energy supply companies, we can expect bills to go up immediately thereafter.

The short-term fluctuations in the value of the Pound, however, are the least of Britain’s worries.  Ongoing EU support for carbon-free energy development – which covers new nuclear and renewables – is now at risk, pulling the rug out from future investment at a time when Britain’s ageing fleet of coal and nuclear power stations are coming to the end of their working lives.  While campaigners may welcome the likely demise of the giant Hinkley Point C nuclear plant in Somerset, they should bear in mind that we will also be losing up to €1.9bn in core funding for renewables too.

Energy security is also threatened as the amount of oil and gas traded on the open market shrinks.  As global energy supply has become more volatile, China has led the way in setting up bilateral and multilateral energy deals with a view to bypassing the world market altogether.  This has benefits for both sides of the deal as the supplier can plan in advance on the basis of an agreed price, while the importer has guaranteed access to a steady supply.  The EU has also been using the purchasing power of its 500m citizens to negotiate similar deals to secure European energy supplies.  By walking away from the internal energy market, the UK is taking the unlikely gamble that it will get at least as a good a deal on the back of its 60m people.

Pulling out of Europe’s internal energy market may also render Britain’s growing renewable energy sector inoperable.  In order to balance the intermittency that is inherent in most renewable generation, the EU has been developing interconnectors between the national grids of member countries.  In theory, these will allow areas whose grids are overproducing to export to areas where there are shortages – e.g., if the wind stops blowing in Wales, no problem because the sun is still shining in Portugal.  In an isolated country like Britain, we are unlikely to be able to balance supply and demand in this way; leaving us highly vulnerable to random power cuts that can seriously disrupt a networked, computerised just-in-time economy.

“No problem” promised the anti-green Vote Leave campaigners.  “Britain will be able to revitalise the North Sea”.  This, of course, is the biggest lie of all.  In case you haven’t been paying attention, the North Sea oil and gas industry is a basket case.  All of the sizeable fields have long since been exhausted.  Production peaked in 1999 and has been falling steadily ever since.  Today it is producing just a third of the oil and gas that was being extracted at the turn of the century.  What remains is in smaller, harder to access and significantly more expensive fields that, even in the climate prior to the referendum, nobody wanted to invest in.

The reality of the situation is that Britain is running out of energy.  Even before the chaos of the Brexit vote we were in trouble, with National Grid putting out regular warnings about the perilously narrowing gap between UK energy supply and demand.  Like it or not, the stark reality is we either connect to Europe’s internal energy market or we turn the lights out on our economy.

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