UK seeks barrier-free power, gas, CO2 trading with EU after 2020

22 May 2020 | Trading

Open to linking to EU ETS like Switzerland

Wants to keep access to EU coupled power markets

Would keep EU wholesale power market rules in UK law

The UK wants to avoid any barriers to trading carbon, gas and power with the EU after the Brexit transition period expires at the end of this year, it said in a draft technical energy accord available on its website on Thursday.

The draft accord sets out the basis for future UK-EU relations on trading gas, power and power interconnector capacity, energy cooperation, climate change commitments and linking carbon emissions trading systems.

Gas interconnector capacity trading is already covered by the amended EU gas directive, which applies EU market rules to offshore links with non-EU countries.

The UK left the EU on January 31, 2019. EU rules continue to apply until the end of the transition period, and the UK can until the end of June request extending this for one or two years.

Carbon pricing

On carbon, the UK is still open to linking any future national ETS with the EU's ETS, as Switzerland has done, "if it suited both sides' interest."

This could mean both sides enabling allowances from either side to be used in either system, setting up ways to exchange relevant information, and agreeing criteria to ensure the systems are compatible enough to link.

The carbon pricing section includes caveats that more legal provisions could be added as a result of negotiations.

Power links, trading

On power interconnector capacity, the UK wants to continue taking part in the inter-transmission system operator compensation mechanism.

It also wants no grid charges on individual trades across power interconnectors, and for both side to commit to maximize available interconnector capacity.

In particular it wants both sides to not limit interconnector capacity to solve congestion within a bidding zone, or manage unplanned loop flows.

The UK wants to continue being part of EU day-ahead power market coupling, and become part of EU intraday market coupling by December 31, 2022 or potentially later. It also wants to have access to EU power balancing markets.

To that end the UK would retain in UK law the relevant parts of EU rules on wholesale power markets, balancing markets, market integrity (REMIT), unbundling, and regulators, amended to apply to the UK only.

Joint governance

The UK wants the exact dates for joining EU intraday market coupling and accessing power balancing markets to be decided by representatives from both sides acting in an Electricity Cooperation Group.

This group would be co-chaired by a UK government minister and an EU commissioner, or their designated representatives.

The group would administer and enforce compliance with the accord, and could also make changes to it.

Formal bodies

The UK wants to have observer status in formal EU gas transmission system operators' body Entsog and EU energy regulatory agency ACER for its gas TSOs and energy regulators.

It also wants to retain power TSOs' right to be members of the formal EU power TSO body Entso-e, and continue cooperating with EU countries on deploying offshore wind and interconnection projects, particularly in the North Sea.

Talks continue

The draft energy accord is one of several sector specific texts published by the UK government as part of its negotiating efforts to agree its future relationship with the EU before the end of this year.

If there is no agreement on the whole package or an extension to the transition period by then, the UK will automatically drop out of all EU cooperation projects on January 1, 2021.

Cross-border arrangements would then have to be agreed with each individual EU country involved.

Source: S&P Global