Boardroom Brexit: What the deal means for energy and climate change

Boardroom Brexit

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The TCA regulates the trade in electricity and gas between the EU and the UK over interconnectors, provides for cooperation in respect of security of supply, the integration of renewables into their respective markets and cooperation to develop hybrid projects that combine interconnectors and offshore wind farms in the North Sea (thus opening up the potential for a North Sea grid), as well as ensuring open and fair competition and stipulating general safety standards.

The TCA does not provide for the UK and the EU to link their carbon pricing systems, but it leaves open the possibility of linking the UK's carbon scheme to the EU’s in the future. The UK has recently adopted the Greenhouse Gas Emissions Trading Scheme Order 2020, which sets out the key elements of the UK ETS which is to replace its participation in the EU ETS.

The EU and the UK will have until 2022 to decide on a new model of efficient electricity trading across interconnectors. This means that, after the Brexit transition period ends on 31 December 2020, the agreed model of trading will not yet be in place. Rather, previously developed and communicated alternative arrangements – which will continue to allow trade and cooperation for security of supply – will need to be implemented in the interim, enduring until the agreed trading model can be put in place.

The aim of the trading model will be to ensure that capacity on the interconnectors is maximised and that there is implicit trading in how this capacity is allocated (i.e. capacity and electricity are sold together). There will be no network charges on individual transactions on, and no reserve prices for the use of, interconnectors. Capacity allocation and congestion management across interconnectors is coordinated between the concerned EU Transmission System Operators ("TSOs") and the UK TSOs.

The TCA also establishes a Specialised Committee on Energy, which is responsible for addressing most energy matters regulated by the TCA. The Specialised Committee on Energy shall, with respect to electricity capacity allocation and congestion management, ensure that TSOs develop arrangements setting out technical procedures. The timeline and details for these are set out in Annex ENRG-4 (Allocation of electricity interconnector capacity at the day-ahead market timeframe).