EU advises members not to give UK greater access to energy market

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Brussels is advising EU member states not to allow the UK deeper access to the bloc’s electricity markets, despite industry warnings of higher energy bills for consumers and a slower transition to net zero.

In a document setting out policy positions on the upcoming “reset” of EU-UK relations, the European Commission said that its “no cherry-picking” principle towards the UK should apply equally to electricity trading. 

“The UK’s decision not to rejoin the single market limits the possibilities for other options to be considered, sectoral participation in the EU energy market would not be in the union’s interest and would be contrary to the European Council guidelines,” said the document, which was circulated to EU member states.

The advice is contained in a 19-page working paper seen by the Financial Times that sets out the bloc’s defensive interests ahead of next year’s EU-UK negotiations, but flies in the face of calls for deeper co-operation on energy trading from the renewables industry in both the EU and UK.

“It’s extremely disappointing and frankly very shortsighted from the commission,” said one senior energy executive. 

European and British energy companies called jointly in October for the post-Brexit energy trading arrangements between the EU and the UK to be radically rewritten to create a “green energy hub” in the North Sea.

They warned that the existing arrangements were not fit for purpose and, without reform, would impede joint commitments by the UK and eight other countries to generate more than 310GW from offshore wind in the North Sea by 2050.

A complex pricing mechanism, known as multi-region loose volume coupling (MRLVC), was included in the EU-UK Trade and Cooperation Agreement but has never come into force because of technical problems.

The commission document acknowledged that MRLVC implementation had been “more complex than expected” and may not be ready when the energy deal in the TCA expires in June 2026, but still warned against allowing the UK preferential access to the EU electricity market.

Adam Berman, deputy director of the industry lobby group Energy UK, said the electricity trading arrangements in the TCA were “fundamentally unworkable”. 

“Better options exist. UK and EU industry have coalesced around a potential solution that respects both sides’ political red lines, but it requires political sign off to progress discussions,” he said.  

In the current electricity trading arrangement, space on the interconnector is auctioned separately to the energy itself — a much less efficient method than auctioning them together.

In October the industry jointly proposed a solution that would extend the EU’s price-coupling mechanism to the UK market, a step they said could be achieved without reopening the TCA — something both sides have said they do not wish to do.

Improved EU-UK co-operation on offshore wind would deliver €44bn in savings to consumers by 2040 and reduce investment costs by 16 per cent, according to a report this month by business consultancy Baringa.

The UK has exported more electricity to the bloc than it has imported since the agreement was struck. 

Mark Copley, chief executive of the European Federation of Energy Traders, an industry body, said the arrangement was causing deep uncertainty for investors and higher electricity bills for EU consumers. 

“Is energy co-operation in the interests of both parties? Yes absolutely . . . If you have existing cables you might as well use them efficiently because they are jointly owned by UK and EU transmission system operators. And if you are going to build new ones you want to reduce the cost of them, which is only possible if you run them efficiently,” he said.

The impact of failing to increase co-operation will be felt most in the North Sea where it risks dampening the investment case for projects such as Princess Elisabeth Island, which will bundle together cables from Belgium’s offshore wind farms as well as interconnectors from other countries in order to trade renewable energy.

In October, Elia Group, the electricity transmission operator that runs the project, warned that deeper integration of the EU-UK energy markets was “essential” to fully harness the potential of offshore wind power generation in the North Sea.

“Market coupling and price convergence are prerequisites for successful UK-EU partnerships, as they will enhance efficiencies and generate greater social benefits. Ultimately, this represents a win-win scenario for both the UK and the EU,” said James Matthys-Donnadieu, Elia Group’s markets chief.

The European Commission did not immediately respond to a request for comment.