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Summary
- A report by Bionic has revealed that UK businesses may face a price hike in energy prices post-Brexit.
- The increase in energy price will be mainly because of the increase in transportation cost, as the UK left the EU’s internal energy market.
The UK businesses may have to face a price hike in energy prices post Brexit mainly due to factors like surge in transportation costs and the UK leaving the EU internal energy market.
The EU supplies almost half of the gas the UK consumes via pipelines from Europe. A report published by services switching company Bionic has highlighted a warning issued by a House of Lords committee, which says that the UK may face serious energy shortages and hike in gas and electricity bills if the authorities do not work on the deal with the EU.
Bionic is a switching company that provides businesses/SMEs with essential services such as business energy, insurance, and telecoms.
The impact of Brexit on the energy supply of the UK
The UK imports 40 per cent of its gas and 6 per cent of its electricity from France, Holland, Ireland, Norway, and other European countries. Earlier, the UK was part of the EU’s Internal Energy Market. However, now it will no longer enjoy the cheap, efficient, seamless, and secure supplies of electricity, gas, and oil.
Though the EU-UK Trade and Cooperation Agreement signed by both the parties has ensured smooth energy supply and efficient trading over interconnectors. However, the deal did not touch upon the prices, which would mean that the UK will pay more for gas and electricity.
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The price hike explained
Post Brexit, once the UK starts operating outside the EU internal energy market, it won’t be able to manage the prices or take part in the decision-making process. This could result in a loss of investment, consumers, and businesses may have to pay extra due to a surge in transportation costs.
Like the stock markets, the supply and demand principles are responsible for price fluctuations in the energy market. The price of energy sources such as electricity and natural gas will vary depending on the requirements of the buyer and the capacity that the market/supplier can offer.
Interesting Read: Energy Consumers in The UK Willing to Adopt Sustainability: Survey
More from the report
The report has stated that in the absence of an adequate energy deal, the energy supply link will also be under stress due to extreme weather or when power infrastructure undergoes technical faults.
Another issue the report highlights that there is no clarity on carbon pricing mechanism after the UK leaves the EU Emission Trading System. This would eventually affect the pricing of thermal generation.
The UK’s major part of the energy supply is procured from the EU. Post-Brexit, the UK has not been able to upgrade its energy infrastructure due to the Covid-19 disruption. To go ahead, the UK needs to devise plans to cut down its dependency on the EU and focus on developing its own infrastructure with other partners.
