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The Irish border and energy – the forgotten issue?

Written by Evan Byrne, Account Executive in Madano's Energy Practice.

Debates about the future status of the Republic of Ireland-Northern Ireland border have rumbled on since the UK’s vote to leave the European Union in June last year.

However, what may surprise many is that since 2007 Ireland has had a unified energy market under the All-Ireland Electricity Market.

Also known as the SEM (Single Electricity Market), it provides a wholesale electricity market for the island of Ireland, regulated jointly by both the Republic and Northern Ireland. The SEM is vital in ensuring security of electricity supply and an affordable cost for consumers on both sides of the border.

While concerns over whether there will be a hard border or not dominate the headlines, concerns within the energy sector are over how the introduction of tariffs might impact Ireland’s energy system.

The Republic is highly susceptible to changes in the UK market because it imports all of its gas and electricity from the UK.

Since production began from Corrib gas field, Irish gas imports from the UK have fallen significantly (from some 97 per cent to around 40 per cent) but it is anticipated that the gas field’s output will halve by 2025. The Republic is still heavily dependent on the UK for oil imports, with nearly half its oil coming from its nearest neighbour.

If there is no exit agreement between the UK and EU, World Trade Organisation rules dictate the future trading relationship. Under WTO rules, trading primary energy products is not subject to tariffs, but there is uncertainty over the tariffs on the use of the two existing interconnectors between Britain and Ireland.

The Republic is taking steps to tackle the uncertainty, most notably with the advancement of the €1 billion ‘Celtic interconnector’ project, which will link Cork with France. The project is eligible for EU funding, and some preparatory work has been done, including a feasibility study.

But this piece of infrastructure won’t be in place by March 2019, when the UK formally leaves the EU, and is currently planned to be operational by 2025, meaning Ireland could have six long years with serious energy concerns and no contingency in place.

What does this all mean?  Ireland desperately needs, at the very least, a transitional arrangement to be agreed between the UK and EU by 2019 or, preferably still, a full and completed trade deal, though this remains very, very unlikely.  The alternative for Ireland is not fully clear but it would mean that the country would face similar problems and challenges that will affect the UK’s energy system after it leaves the EU, despite being an EU member state.