Energy Institute


How will Brexit affect Ireland’s energy sector?

In the last twenty-five years the EU has promoted a convergence of energy and environmental policy across the EU’s member states. Overall the experience is that the alignment of policies has benefited both Ireland and the UK 1. This pursuit of similar energy policies by the Irish and British Governments aimed to promote investment, enhance competition, and increase energy security by improving access to energy supplies.  Our oil, gas and electricity markets are parts of larger markets of North-western Europe character within the EU’s energy markets.

Over the same period, and partly as a result of market reforms and investment in new gas and electricity inter-connectors, the islands of Ireland and Britain have become more interdependent in meeting their energy needs. We are both large importers of oil, gas, coal and, from time to time, electricity. Ireland’s energy markets and supply infrastructures are closely linked to the UK and changes in one jurisdiction affect the other.

However, Brexit could in some circumstances lead to short term energy demand and supply imbalances. Uncertainty is the greatest business risk and delayed investment could have economic impacts that could affect electricity and gas prices and supplies in the medium term. Thus the immediate effects will depend on factors that are for the time being unknown – what sort of Brexit? Whether hard or soft? And most particularly the resulting economic climate and its impact on energy demand here and in the UK.

Like Britain, we are large importers of natural gas and oil and until recently we imported between 5 and 10% of our electricity. Approximately half of the gas that we use for electricity and heating and three quarters of our supply of oil products, primarily to fuel the transport sector, are imported via UK ports, pipelines, refineries and subsea interconnectors 2. Under EU regulations, in the event of shortages the UK and Ireland have an Action Plan on gas sharing.

The concern with Brexit is that if the UK is no longer prepared to be subject to EU trading rules, what will take its place? This is the key uncertainty for investors and the most likely outcome is delayed investment. Depending on economic performance prices could go up or down reflecting surplus or scarcity.

Under Brexit, a two-year period of negotiations will determine the terms of the UK’s withdrawal from the European Union. At present, primary energy coming into the EU such as gas from Russia is traded under bilateral agreements. A similar type of arrangement can be made between the EU and the UK or, failing that, it will fall under World Trade Organisation tariffs.


Natural Gas exports from the UK to Ireland

Source

  • Natural Gas Exports from the UK to the Republic of Ireland


Electricity is a secondary form of energy and it trades under different rules. Non-member states like Switzerland have adopted legislation that is compatible with the EU’s electricity regulations and are granted access to the EU’s electricity markets. The UK “Repeal Bill” aims to ensure that from day one of Brexit all existing EU regulations will become English law until the UK decides to amend or change the legislation. The impact of Brexit on the UK’s current electricity trading arrangements will only become clear as the negotiations conclude.

Ireland is part of a ‘Single Electricity Market’ between Ireland and Northern Ireland and has interconnection North and South which exposes us to changes in the UK’s electricity markets. Since 2007, a bilateral agreement between Ireland and the UK ensures that all utility scale electricity generated on the island of Ireland is bought and sold via a common wholesale electricity pool.  Similar arrangements are in place for an all-island gas market in natural gas.

Ireland is connected to the UK via three gas and two electricity subsea interconnectors, with a new North-South electricity interconnector under development. As the EU plans for greater integration of its energy markets, the Irish Single Electricity Market is being adapted to a new ‘Integrated-SEM’ to liberalise the market, open-up competition and facilitate cross border trading in the EU. It is unclear whether these new regulations will be subsumed into the UK’s independent electricity market following Brexit.

Over the long term, Ireland may have interconnection with France and direct access to the European Union. It is the view of experts and economists that this should only be advanced if it is to the benefit of consumers in Ireland and France 3.