EXPRESS #4 - September 11, 2018
In an open letter to UK Prime Minister May and European Commission President Jean-Claude Juncker, coordinated by UK-based think tank E3G, a broad business alliance has called on the EU27 and the UK to “prioritise cooperation on climate and energy”.
The alliance, a rather mixed group, consisting of EDF, Unilever, WindEurope, EnergyUK, RenewableUK, the British-Irish Chamber of Commerce, the Electricity Association of Ireland, Earth Capital Partners (an investment company) and Lofbergs (a Swedish coffee roaster), calls for the establishment of a “comprehensive Climate and Energy Chapter” within the Brexit negotiations “and that this be prioritised in the future relationship negotiations.”
I may be wrong, but it seems a bit late, this initiative.
In any case, “Addressing climate change and energy together creates an area of mutual benefits where the respective interests of the EU and the UK are balanced, allowing for more rapid agreement”, the Alliance adds hopefully. “Such a balance of interests is only possible if the Chapter addresses issues such as cooperation on emission targets, clean energy projects of common interest, climate and energy diplomacy and carbon pricing, which it would not be possible to address adequately in a more conventional EU Free Trade Agreement (the FTA with Canada does not cover energy).”
Within such a Climate and Energy Chapter, negotiators should look at seven priorities, says the alliance:
- Agreement to cooperate on implementing the Paris Agreement.
- Agreement to no tariffs on energy trading, efficient trading arrangements across interconnectors and cooperate on developing markets for shared balancing services.
- Agreement that after Brexit both the UK and EU27 will maintain the high environmental standards on products, vehicles, industrial emissions, and sustainable finance currently agreed within the EU, and agreement to a process of dynamic cooperation to discuss future increases in these standards.
- Agreement to prioritise delivering zero tariff and non-tariff barriers to trade between the EU27 and UK in low carbon goods and services.
- Agreement to diplomatic cooperation on energy and climate change.
- Agreement to co-investment in clean energy infrastructure and R&D projects of common interest.
- Agreement that the UK will continue to participate in the EU Emissions Trading System (EU ETS) until at least the end of phase IV.
Meanwhile, EU-UK energy relations won’t be helped by the news that Austria has decided to appeal the EU’s approval of the UK’s Hinkley Point nuclear power plant support scheme.
“Our lawyers have examined this in detail in the past weeks. We believe the chances of an appeal remain intact,” Sustainability Minister Elisabeth Koestinger said in an interview with newspaper Kronen Zeitung, according to Reuters.
French utility EDF and China General Nuclear Power Corp aim to have the Hinkley Point C nuclear power station on line in 2025 with costs for the project seen at 19.6 billion pounds ($25.3 billion), notes Reuters. “The European Commission cleared the project in 2014, saying it did not see any competition issues. But Austria took its objections to the General Court in Luxembourg, which dismissed them in July.”
“One aspect Vienna objects to is a guaranteed price for electricity from the plant which is higher than market rates. It also opposes state credit guarantees of up to 17 billion pounds being provided for the project. Austria can appeal to the European Court of Justice but only on matters of law.”
Reuters notes that “Opposition to nuclear power is widespread in Austria, which built a nuclear reactor but never brought it on line. Voters rejected plans to bring it into operation in a referendum in 1978 and the reactor, at Zwentendorf on the Danube northwest of Vienna, now serves as a training center.”
But did anyone tell the Austrians that the UK is leaving the EU? Won’t that mean they won’t need EU approval any more of any energy support schemes?
The UK government has long since abandoned even the pretense that it is trying to create something like a free, liberalized energy market. It is intervening into the market left and right. The latest measure of the one-time champion of liberalization: a gas and electricity price cap for UK households.
In July the government had asked regulator Ofgem to come up with a proposal for a cap. On 6 September Ofgem announced that it recommends an energy bill price cap of £1,136 a year for “typical usage”, reports the BBC.
Ofgem says “the move will mean 11 million households on default deals will save about £75 on average, although the amount households could save will depend on their usage and supplier.”
The planned cap will be confirmed in November, take effect at the end of December and stay in place until 2023.
Ofgem said it was a “tough” cap which would give a fairer deal to consumers.
The plan is “that when the price cap is introduced at the end of the year, gas and electricity suppliers will have to cut their prices to the level of or below the cap. The £1,136 a year cap is based on a typical dual fuel customer paying by direct debit and the aim is to force energy companies to scrap excess charges for people on poor value default deals.”
More than half of all households in Britain are on default tariffs – normally a standard variable deal – because they have never switched or have not done so recently. Even those that have switched in the past are often automatically put on more expensive default deals when they come to end of fixed-term contract deals, notes the BBC.
Some experts have warned that customer should still consider switching suppliers if they want to save money. “There are more than 100 tariffs available right now which are cheaper than the proposed level of the price cap at £1,136. That means switching today could save you £250 or more, and there’s no need to wait for a price cap that would actually save you on average £75”, said one.
Martin Lewis, founder of MoneySavingExpert, added: “The savings [from the energy cap] are still pitiful compared to the amount people would get if they switched and went to the market’s cheapest providers – yet there is a real concern the imposition of a cap will give people a false sense of security that doing nothing is fine.”
The law was needed to stop loyal customers “being exploited”, according to the Business Secretary Greg Clark.
Ofgem chief executive Dermot Nolan said: “Once the price cap is in place, all households in Great Britain covered by the cap will be protected from being overcharged for their energy.”
Thus, the nail is hit in the coffin of the ‘free UK energy market”.