The inefficiencies of Brexit cost UK consumers hundreds of millions of pounds, just as food and energy prices surged
As a direct result of the UK’s departure from the European Union, British energy bills swelled by as much as £1.1 billion ($1.4 billion) last year, and complications of the post-Brexit system might also hamper the UK’s development of new renewable energy.
The steeper energy costs mark yet another fallout of Brexit, which continues to be felt in ways voters might never have anticipated when they made the 2016 decision to leave the European Union.
One big problem is interconnectors: the undersea cables that bring electricity to the UK from other countries like Norway and France. As of 2023, the UK’s National Grid operates five interconnectors; one more, linking the country with Denmark, is being built. The sale of electricity to the UK through these interconnectors used to be governed by the EU’s internal energy market, which calculated prices efficiently across the bloc.
After Brexit, the UK lost access to that market. Now, the prices it pays for interconnector power are determined daily by a “patchwork” of different arrangements, according to a report released today (May 15) by Energy UK, an industry body. The resulting inefficiencies cost the UK between £130 million and £370 million in 2022, the report said.
Energy UK said it expects the UK to eventually become a net exporter of electricity, as it builds more wind farms to hit its target of net zero emissions by 2050. But the current issues with interconnectors make that energy exchange more difficult and will only worsen with time. Energy UK said it was concerned that the interconnector inefficiency problem would make for “greater uncertainty and a reduced investment drive” in energy infrastructure projects, such as the construction of new interconnectors between the UK, neighboring EU countries, and Norway. In turn, this could affect how much renewable energy capacity is built in the coming years, the report suggested.
The second issue flagged by Energy UK is carbon pricing, which many countries have introduced as a way of taxing and disincentivising the use of fossil fuels. The EU is the UK’s main trading partner for carbon-intensive goods like iron, aluminium, and electricity. The UK now has to pay extra charges on its exports of these goods to the EU, because its carbon market is no longer linked to the EU’s. These costs totalled roughly £700m in 2022, according Energy UK’s analysis.
In total, “post-Brexit trade arrangements relating to UK electricity created over £800m of additional costs in 2022, with a worst-case scenario at around £1.1bn in additional costs borne by consumers and electricity producers,” the report said.
The new figures from Energy UK help illuminate why 2022 felt like such a catastrophic year for UK energy consumers. Russia’s full-scale invasion of Ukraine early in the year pushed gas prices higher, compounding a series of problems that the market was already facing and pushing European prices to record highs.
The UK and other European governments had to step in, spending as much as $800 billion to shield their citizens from higher energy costs through the winter.
While those subsidies helped, the UK faced double-digit inflation through the spring, driven in part by unflaggin genergy costs. People bearing these expenses will likely be further infuriated that market inefficiencies resulting from Brexit are adding to their pain, just at the moment when they need some relief.
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