UK is no energy island

Steve Holliday

Steve Holliday, Vice President of Energy Institute and former CEO of National Grid

Red flags have this week been raised by engineers and other professionals who work to provide a reliable supply of energy to our homes, workplaces and roads, that energy must be a serious priority for Messrs Davis and Barnier at the negotiating table in Brussels.

During my decade at the helm of National Grid I was acutely aware of the interconnected nature of the UK’s energy system. As an island nation we enjoy enormous indigenous energy resources. But the efficiencies available through trading energy with our European neighbours offer huge benefits to consumers, the resilience of our economy and the environment.

We are physically connected. Vital electricity cables lie on the sea bed connecting the UK to France, Ireland and the Netherlands. Gas pipelines link our system to Belgium, Ireland and the Netherlands. About 5% of the UK’s electricity is imported from the EU, and 38% of its gas.

Interconnection is the most tangible manifestation of collaboration with our European neighbours in the energy sphere. There are many others – standards on cars and kitchen appliances; targets on renewables energy efficiency and carbon reduction – these provide a level playing field for mutually beneficial gain.

Membership of the EU is not essential to a fruitful relationship with European neighbours – after all Norway provides up to a fifth of the UK’s gas – but what will be complicated is disentangling decades of carefully crafted market integration and finding new mechanisms for achieving similar benefits.

So I’m not surprised that the Energy Institute’s new 2017 Energy Barometer ranks Brexit uncertainty among the five most pressing concerns of energy professionals. And those surveyed are very clear on the four big signposts for the new Government as it navigates Brexit.

First – existing EU energy laws that govern how Europe’s energy markets work should be transferred into UK policy post-Brexit as a top priority and as seamlessly as possible. Second – the UK must retain the closest possible cooperation with the EU. It would be a mistake to assume going it alone is an option – not least in the case of Ireland and Northern Ireland, who presently share a single all-Island Energy Market. Third – the Government needs to act to ensure the necessary skilled workforce is available to the energy industry, prioritising engineers in particular. Nearly 60% of those responding to the Barometer anticipate a fall in the number of skilled workers, if free movement of labour is curtailed.

Lastly, energy investors are desperate for a predictable, no-surprises policy environment. Energy and climate policy has been on ice for the best part of a year. After a decade of tremendous progress in decarbonisation in the power sector, investor confidence has also chilled. Investment in clean energy plunged in the first quarter of 2017 to around $1bn, the lowest since 2010. Add to this the potential loss of around £2.5 billion of EIB bank loans in energy each year and the need for government to defrost its strategy is critical.

That means bringing clarity, soon, through the much heralded Industrial Strategy, a Clean Growth Plan to meet our carbon reduction targets, and breaking the logjam of delayed policies.

The UK is no energy island. Energy, due to its complexity, investment lead times and importance to our economy and society, stands out as a special case among industries which are heavily integrated at the European level in need of an effective, clear and far-sighted government strategy. And it must be one that retains essential links – and future ambition – to make the most of collaboration with our energy neighbours on the European mainland.

The Energy Institute’s Energy Barometer 2017 is available here.

This blog post first appeared as an article for the Times comment online on 29 June 2017

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