Brexit gives the UK a chance to rethink energy policy, but business must stay at the forefront of negotiations

Courtney Goldsmith
Follow Courtney
Coal Remains Main Source Of German Energy Supply
The UK's energy sector needs a transitional agreement after Brexit (Source: Getty)

Britain should use Brexit as an opportunity to rethink some aspects of its long-term energy policy, a new report suggests.

A report by law firm Herbert Smith Freehills and consulting firms Boston Consulting Group and Global Counsel suggests the status quo of remaining in the EU's internal energy market is "highly unlikely", and it considers how the sector should adapt to what comes next.

The "best case scenario" for the UK is one where it avoids becoming a "rule taker", and instead uses Brexit as an opportunity to rethink some aspects of long-term energy policy, like options to develop nuclear power and achieve the decarbonisation agenda in a more cost-efficient way, the report argues.

Read more: Ofgem to set out plan for energy market as Tories go quiet on price cap

A transitional agreement was also noted the "best hope" for getting an ambitious deal on energy for both the EU and UK in Brexit negotiations.

"Something that hasn't been widely picked up on is that the UK is, sensibly, only seeking an outline deal in time for Brexit, with the full deal and implementation finalised over subsequent years. Such an approach, with a largely status quo and phased transition period would itself have to be agreed, but it offers the best hope for getting the ambitious future deal both sides say that they want and to minimise disruption," said Paul Butcher, Brexit director at Herbert Smith Freehills.

While the UK is working to assist the smooth transition of businesses with the Great Repeal Bill, which essentially aims to replace EU laws with UK equivalents, some cross-border legislation, such as the Euratom Treaty, will not be preserved.

“The most likely outcome for the UK’s energy system is continued physical linkage to the internal energy market, through a bilateral agreement on energy, either forming part of, or ‘flanking’, a wider free trade deal. But there is a long way to go to secure such agreement” said Matthew Duhan, energy lead at Global Counsel.

‚ÄčThe report argues that ensuring business holds a strong voice in negotiations will be critical in guaranteeing the outcome is beneficial for both the EU and UK.

"A key role for business will be in ensuring that political pressures on both sides – in negotiations over energy and other areas of the Brexit negotiations - do not lead to economically suboptimal outcomes," Duhan said.

"The future of the UK energy market will be dictated by policymakers’ choices during this period, so it is vital that businesses equip them with both evidence and argument to make the right decisions for the UK, and the EU,” he said.

Read more: Government powers clean energy innovation with a £35m investment

Related articles