Brexit poses serious risk to Ireland’s energy policy

Ireland’s energy landscape could be irrevocably altered if Britain were to exit the EU’s energy market as a result of Brexit, the Economic and Social Research Institute (ESRI) has warned.

While the British government has signalled its intention of remaining inside the bloc’s integrated energy market, this is by no means guaranteed, an ESRI research paper has suggested.

The paper cited the example of Switzerland which saw its integration into the EU's energy market stall following the rejection of a referendum on the freedom of movement in 2014, the same issue which has sparked such fierce debate in the UK.

“Drawing on the Swiss experience, Britain’s continued full participation in the European electricity market is not guaranteed, especially considering the fact that the physical links between the British and European electricity markets are much weaker than in the Swiss case,” the ESRI said.

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As Britain is the only electricity market that is physically linked to the all-island Irish electricity market, this could have serious implications for Ireland.

The ESRI's paper, entitled Re-evaluating Irish Energy Policy in Light of Brexit, warned that without common rules for the trading of electricity over interconnectors, there was potential for perverse interconnection flows, where electricity flows from the expensive region to the cheaper region rather than the other way around.

“Even in the absence of tariffs over interconnectors, if the timing of the purchase and sale of electricity over interconnectors is not aligned across markets, this can lead to sub-optimal usage and means the markets will not be properly linked.”

Infrastructural projects

Despite the risk posed by Brexit, the ESRI’s paper concludes that the UK is likely to remain a member of both the European gas and electricity markets, “but [this is] not guaranteed”.

So while it might be tempting to prioritise infrastructural projects such as liquefied natural gas terminals or the Celtic interconnector to France, the decisions on whether to proceed with these projects should be justified by a thorough cost-benefit analysis.

"It is prudent to consistently re-evaluate and reappraise policy in light of major global events such as Brexit," the report's author Muireann Lynch said.

“ However, policy makers should exercise caution in determining their priorities. While Brexit will certainly impact on the policy landscape, there are many opportunities for improving Irish energy policy that should be addressed regardless of Brexit.”