Why plans to import more power from Europe after Brexit are flawed

Why plans to import more power from Europe after Brexit are flawed

Just under a month before last year’s referendum I gave evidence to the House of Commons Energy and Climate Change Select Committee. The session, which can be watched here, was titled “Implications for energy and climate change policy regarding the EU referendum”. I suspected – rightly – that the hearing had a pre-determination to try and explore and then conclude why a vote for Brexit would be bad for British energy policy. I was determined to explain why this wouldn’t be the case and how EU membership had already weakened UK energy security and diversity.

Pitched against two witnesses who opposed Brexit in a hearing with MPs who supported Remain, I made the case for withdrawal with a large degree of frustration – because MPs on the Committee did not accept (or simply did not know) how corrosive EU policies had been for UK energy security over a generation.

I had already written in the Yorkshire Post on why EU withdrawal was in the UK’s energy interests and followed up in the Daily Telegraph just three days before the referendum.

Back to that Committee session, and on the UK’s energy relationship with the EU, I started by explaining how EU Directives had already forced the UK to close over 30% of its firm electricity generation capacity (coal and oil plants) in the space of just six years. This whilst policymakers in Whitehall – having acquiesced in implementing and supporting closure after closure – had then subsequently stumbled from one flawed intervention to another to try and get replacement plants built.

A consequence of not encouraging or delivering the right market signals to get new gas-fired power stations built has resulted in a new policy to support the laying of more undersea electricity cables – known as interconnectors – to import more and more electricity from the Continent. This is the wrong policy and contains significant risks. I went into further detail on this, after the referendum, with evidence to the House of Lords Economic Affairs Committee in October last year, which can be seen here.

It is important to appreciate our growing reliance on imported electricity, the plans to quadruple this dependency and the consequences for prices and security of supply. My recent paper, The Hidden Wiring (co-authored with Daniel Mahoney), follows months of research and analysis into proposals for new interconnectors to import electricity and their impact on Britain’s electricity market. We are calling for our findings to be urgently considered and examined by the competition authorities and Parliament.

Britain’s interconnector imports from Europe increased by 52% in the three years to 2016 and they are set to surge as new interconnectors are planned. Back in 2012, imports were expected to account for just 6 terawatt hours (TWh) of supply per year in 2030. But four years later, the projection has radically changed. The 2016 forecast sees Britain’s electricity imports rising from 21TWh today, to a peak of 77TWh in 2025. That’s close to a fifth of supply.

Importing electricity, in principle, can have advantages ranging from price to abundant availability, depending on a series of important factors. However, our research shows that it is increasingly unlikely there will be much spare electricity in Europe to send to the UK going forward. This, in turn, means scarce electricity in the UK could be exported to Europe as it is attracted by higher prices there. This would exacerbate price spikes and supply issues at home.

The truth is that Britain’s rising electricity imports are, in the short term, an easy way out for failed energy policies at home stretching back over a generation. Back in 2012, the Coalition had the right plans for a new generation of gas-fired plants that would be easy to switch on and off to accommodate the sporadic nature of weather dependent renewable supplies. It estimated that Britain would need 26GW of additional gas generation capacity by 2030 to plug any potential gap left by cloudy, windless days and to replace the output from closing coal, oil-fired and elderly nuclear plants. On current trends, however, the UK is on track to build just 12GW of gas plants by 2030. This goes some way to explain the panic dash to build interconnectors.

Declining electricity capacity and supplies on the Continent are key to our conclusions. Both France and Germany are reducing their reliance on nuclear power (in Germany’s case, to zero by 2022) without knowing what will replace it. EU policy to combat climate change and air pollution will also accelerate the shutdown of firm generating capacity (coal, lignite and oil) across the Continent. Europe still generates considerable electricity from coal and these plants are increasingly vulnerable to new legislation and political factors. A factor which led to coalition talks collapsing in Germany was Angela Merkel’s refusal to accept Green demands to close Germany’s dirtier coal plants early. Holland is similarly keen to close coal plants over time with plans for a new carbon tax.

All of this means that importing power is likely to get more challenging and expensive – not less. And yet the way in which Britain encourages and allocates access for imports to the electricity grid continues to discourage building new gas plants here as they enjoy certain unfair market exemptions. It simply undermines the investment case.

Britain will need to become more competitive after Brexit and lower energy costs will be crucial. A key tool in achieving this will be through robust, secure and stable electricity supplies. A dash to become more reliant on imports is not the answer.