Photographer: Mike Wilkinson/Bloomberg

U.K. Seeks to Abandon Green Goal That May Sour Brexit

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  • Britain wants to avoid fines due when green target is missed
  • Abandoning target may conflict with broader EU energy links

Britain is looking for ways to scrap its 2020 clean energy targets while maintaining everyday trade in Europe’s energy market, an early sign of the kind of cherry-picking that threatens to sour Brexit negotiations.

Officials in the Treasury and the business department are looking for a way to abandon the national goal of getting 15 percent renewable energy by 2020, which is almost double the current level, according to a person with knowledge of the matter who asked not to be identified because the discussions are private.

Erasing the target would allow Britain to skirt fines that could reach tens of millions of pounds since it’s on track to narrowly miss the 2020 goal. It would also move the U.K. out of step with other European Union nations that maintain targets as part of their membership in the region’s energy market. The U.K. wishes to preserve its link to the market and smooth cross-border trading of electricity, which has helped lower power prices, the person said.

“There is a risk that energy gets wrapped up in the wider political negotiation, with the EU seeking to make access to the Internal Energy Market subject to the U.K. signing up to future energy and environment legislation,” said Simon Virley, head of power and utilities at consultants KPMG LLP an a former director-general of the U.K.’s energy and climate ministry. “That is when it could get difficult.”

The move is an example of Prime Minister Theresa May’s government seeking to maintain the most advantageous parts of the EU relationship while scrapping rules concerning to business -- the sort of “cherry picking” that the European Commission has ruled out. May began the two-year process of leaving the union on March 29. And while renewables targets and electricity market rules are negotiated differently, they link at the level of political discussions.  

Politicians in the European Parliament adopted a resolution on Wednesday that opposed piecemeal or industry-specific deals between the EU and Britain as one of its conditions for approving the U.K.’s withdrawal arrangement. The lawmakers agreed that any future deal is conditional on the U.K. continuing to stick with the EU’s policies on climate change and the environment.

Market’s Advantage

The EU’s Internal Energy Market is a package of assets, codes and rules that allow intraday trading over borders. Britain wants to build up those links as part of its effort to maintain electricity supplies as aging power plants retire from service.

For a story about how Brexit will affect the U.K.’s power market, click here.

Britain already has power links with about 4 gigawatts of capacity, according to National Grid Plc, and that could reach about 18 gigawatts by the mid 2030s. In all future scenarios, the U.K. will remain a net importer of electricity until the early 2030s, the grid operator predicts.

Power links with other countries are key to reducing the cost of electricity, since each gigawatt of interconnector has the potential to reduce wholesale prices by as much as 2 percent, according to National Grid. 

Unprecedented Talks

No country has left the EU before, though other countries outside the EU such as Norway have energy agreements in place and are part of the internal energy market. The U.K. may seek to follow the Swiss, who have been negotiating deals on energy for a decade with the EU but aren’t allowed intraday trading of electricity, according to Antony Froggatt, an analyst at the Chatham House research group in London.

A government spokesman said the U.K. remains committed to tacking climate change and will meet all targets “while we remain part of the EU.”

“We are proposing a bold and ambitious trade agreement that covers sectors crucial to our linked economies, including network industries,” the official from May’s office in Downing Street said in an emailed statement.

The renewables target has helped draw investment into the U.K. for building wind and solar farms, the fastest-growing source of new power generation capacity. It serves as a sort of broad signal of what forms of energy policymakers wish to encourage, giving investors confidence that the projects they back will be able to sell their power.

Behind Target

Britain is behind schedule on achieving its 2020 target and will meet them no earlier than 2022, according to National Grid Plc. Backing away from the goal would ease pressure on utilities struggling to switch off stations powered by fossil fuels in time.

It wouldn’t have much impact on the EU’s overall goal for 2030 negotiated as part of the United Nations deal on climate change in Paris in 2015. National commitments under that target haven’t been doled out. The U.K. is seeking to avoid further constraints on its energy mix stemming from the EU, according to the official.

Keeping the targets also is important for 85 percent of Conservative party voters, according to a survey released by the think tank Bright Blue on Tuesday. 

“There is no mandate from Conservatives to dilute current environmental regulation, said Sam Hall, senior researcher at Bright Blue. “There are a handful of prominent Conservatives who are skeptical about environmental challenges and policies. The mainstream of Conservative voters do not support scaling back current EU environmental regulations.”

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