Energy industry representatives have revealed that Brexit has increased the price of power supplies from Europe by approximately £370 million annually. According to estimates from Energy UK, the trade body for the sector, the total cost of leaving the EU could soar to £10 billion by the end of this decade.
In a recent statement, Energy UK urged Labour leader Keir Starmer to pursue a closer trading relationship with the EU as part of a “reset” agenda he is advocating for Brussels. Before Brexit, the UK benefited from the EU’s internal electricity market, which streamlined pricing and flows through a system called “single day-ahead coupling.” This system utilized algorithms to optimize electricity distribution across member states.
The UK imports and exports electricity via interconnectors—massive undersea cables connecting with Norway, Ireland, France, Belgium, Denmark, and the Netherlands. However, since the post-Brexit trade deal took effect in January 2021, the British market has been excluded from this algorithmic network, which has significantly hampered trading efficiency and driven up costs.
Kisha Couchman, Deputy Director of Energy UK, noted, “One of the unfortunate consequences of Brexit is that we have been left with these very inefficient trading arrangements, and there is a cost to that.” She indicated that annual costs range from £100 million to £370 million, ultimately affecting consumers directly. This increase is a byproduct of the “hard Brexit” approach championed by Boris Johnson’s administration at the end of 2020.
Energy UK emphasized that reinstating a unified trading operation would not only alleviate electricity costs but would also foster greater incentives for decarbonization efforts on both sides of the Channel. They argued that a more efficient import and export framework would be advantageous for both the UK and the EU as they work towards net-zero targets by 2050.
In a recent report, Energy UK asserted, “Linkage is critical for the UK and EU industries and is supported by British and European industry and civil society alike. This should be a priority for the new UK government to address.”
Moreover, their latest briefing warned that without a move toward closer cooperation with the EU on energy and climate issues, the UK risks incurring additional costs of up to £10 billion during this parliamentary session, driven by higher energy bills and decreased Treasury revenues. The report estimated costs associated with energy trading outside the bloc to be between £120 million and £370 million annually, along with an anticipated £800 million in carbon tax charges that the EU plans to impose on imports starting in 2026.
Their analysis also projected that the Treasury could see a revenue loss ranging from £900 million to £2.4 billion yearly due to reduced demand for UK energy as new emissions trading regulations come into play with the EU’s carbon border adjustment mechanism in 2026. While the UK is anticipated to become a net exporter of electricity by 2030, the new carbon tax barriers may hinder the UK’s full potential.
Previous studies indicated that changes to trading arrangements over interconnectors could increase wholesale costs by between 0.25% and 0.7%, amounting to an added burden of £90 million to £250 million in 2021 alone.
A joint statement following a recent meeting between Starmer and European Commission President Ursula von der Leyen highlighted a commitment to addressing broader global challenges, including energy prices. The statement emphasized the importance of continued collaboration between the UK and the EU to tackle these fundamental issues and bolster strategic cooperation.
