Ireland’s energy markets are closely connected to those in the UK and to date the regulatory regimes in both countries have worked well together. This is largely because a significant amount of the applicable energy regulation, in both the UK and Ireland, derives ultimately from EU legislation. Brexit will not change this immediately, but over time we will see the regulatory regimes diverging, with implications for our energy markets.
The UK published its White Paper on its future relationship with the EU, in which it provided some clarity on issues surrounding Brexit and its impact on the Irish energy market and much of this has been reflected in the draft Withdrawal Agreement which appears to have been reopened for negotiation. The draft Withdrawal Agreement includes co-operation between the North and South of Ireland in a number of areas including Energy and there is an openness to new bilateral agreements and arrangements between Ireland and the UK to maintain North-South cooperation which is consistent with the Good Friday Agreement.
In the event of an agreed withdrawal from the EU the following positions should prevail:
- The all-island common wholesale electricity market (the Single Electricity Market), through which all electricity generated and consumed in Ireland and Northern Ireland currently passes, will be maintained. This market is not actually founded on EU legislation, but is in fact a bilateral agreement between the Irish and UK governments. However, it does rely on the implementation of EU regulations, particularly in respect of network codes for transmission and distribution of electricity.
- The Withdrawal Agreement provides that the Provisions of Union Law governing wholesale electricity markets shall apply to and in the United Kingdom in respect of Northern Ireland.
- However, EU law provisions relating to retail markets and consumer protection shall not apply.
A binding commitment to support the Single Electricity Market is to be welcomed. In addition the Political Declarations issued with the Withdrawal Agreement includes commitments by the UK and the EU to co-operate to support the delivery of cost efficient, clean and secure supplies of electricity and gas, based on competitive markets and non-discriminatory access to networks. It also anticipates the establishment of a framework to facilitate technical cooperation between electricity and gas networks operators and organisations which will include mechanisms for security of supply and efficient trade over interconnectors. It is likely, however, that the Connecting Europe Facility (CEF) would no longer facilitate funding for interconnectors following Brexit even in a “deal” exit.
In a “no deal” scenario there will obviously be more complications for the energy industry and consumers on the island of Ireland. The Single Electricity Market should still prevail, however, as the European Court of Justice will have jurisdiction in relation to disputes in the Single Electricity Market this is likely to present complications in any cross border dispute scenarios. Changes will probably be required to industry codes and that may impact on the operation of the interconnectors between Ireland and the United Kingdom (including Northern Ireland). Given the integrated status of the existing gas and electricity networks and the importance of close coordination on energy matters to both the UK and the EU it is likely that even in a “no deal” scenario there will be provisions put in place to maintain the status quo in the near time while a long term arrangement can be agreed.
However, Brexit could also present new opportunities for businesses in the Irish energy sector, with natural gas being an example. Ireland has traditionally relied on the UK to comply with its security of supply of gas obligations under EU regulations. If this is no longer possible as a result of Brexit, it increases the importance of the development of alternative gas suppliers in Ireland, such as LNG facilities.