The British government is considering how to establish a separate Northern Ireland electricity market in the event of a no-deal Brexit and warned that it may need to introduce legal measures to ensure security of supply in the region.
In its latest advisory for businesses preparing for a possible hard split with the EU, the government on Oct. 12 acknowledged that crashing out of the bloc without a deal at the end of March 2019 could cut off Northern Ireland's access to the integrated Single Electricity Market it shares with the Republic of Ireland. "Separate Ireland and Northern Ireland markets will be less efficient, with potential effects for producers and consumers on both sides of the border," the Department for Business, Energy and Industrial Strategy, or BEIS, said in the notice.
In Northern Ireland, System Operator for Northern Ireland Ltd., the region's grid operator, may need to rely on fall-back arrangements to ensure power is able to flow over the 500-MW Moyle interconnector to Scotland in the absence of reliable rules for cross-border trading, the government said.
To Brexit-proof its power system, Northern Ireland's utility regulator and its power grid operator are currently in talks with generator AES Corp. to keep almost 660 MW of coal- and natural gas-fired capacity at two separate facilities online. The plants are slated for early retirement, but the loss of capacity would increase the risk of blackouts if supply from south of the border is cut off.
"Government or the Northern Ireland Utility Regulator will act to seek to ensure adequate generation capacity is in place, as far as possible through a competitive procurement process involving existing generation and new generation investment alongside demand-side measures," the BEIS notice said, although it did not detail where extra generation would come from.
A cut-off of power imports from south of the Irish border could require thousands of generators on barges in the Irish Sea to provide power to Northern Ireland, according to a private government paper that the Financial Times uncovered in July.
According to BEIS, the government will use existing legal powers to keep the market operating but may need to seek additional powers to preserve security of supply, it said, working with the industry and the Irish administration "to move as quickly as possible to a settled long-term state supported by sufficient levels of generation and interconnection to deliver long-term energy needs."
The government said that negotiators have already made good progress on a legal provision to underpin the all-Ireland market in the U.K.'s withdrawal agreement.
Less efficient interconnection could impact renewables
The government also warned interconnection operators that power trading between the U.K. and other European countries will become less efficient if the country does not reach an agreement with the EU, advising them to set up alternative trading arrangements to prepare for that case.
The U.K.'s electricity market would decouple from the EU's wider Internal Energy Market under a no-deal Brexit, meaning "trade on interconnectors will be less efficient," according to the government. The IEM facilitates cross-border flows that have become more important in recent years with the expansion of intermittent renewables and the ensuing need to balance supply and demand.
"The renewables industry is a significant British infrastructure project, and a 'no deal' outcome as outlined in today’s guidance would mean uncertainty for industry and higher costs for consumers," Emma Pinchbeck, executive director of industry association RenewableUK, said in a statement responding to the release.
The U.K. imports less than 10% of its electricity through power links with France, the Netherlands and Ireland that have a total capacity of 4 GW. But an additional 7.7 GW of interconnection capacity is either under construction or in planning, according to British energy regulator Ofgem. Link operators, which include the U.K.'s National Grid PLC and French grid operator Réseau de Transport d'Electricité, should "carry out contingency planning for a no deal scenario", the government said.
Regulators in the U.K. and the EU will need to approve new access rules around electricity trading but the government said it has no plans to change its domestic approval process or the requirements for access rules. Ofgem is working with interconnector operators to ensure new access rules are approved in Britain and is also providing support for market participants engaging with authorities in other EU member states, it said.
A separate advisory released last month said a no-deal Brexit could jeopardize funding for several proposed interconnectors and threaten future investment in other cross-border transmission projects. Renewable investment in the country could also be stymied if the U.K. left the EU-ETS, the bloc's cap-and-trade system for emissions from generators and other major CO2 emitters.
A no-deal Brexit is not expected to fundamentally affect gas trade between the U.K. and EU, the BEIS said Oct. 12.