How EU deal could cut NI electricity prices

The prime minister this week continued to strengthen the bonds between the UK and the European Union.

Sir Keir Starmer moved the UK closer to participation in an EU loan scheme for Ukraine, which could unlock opportunities for UK defence companies.

Another potential deal in the pipeline between the UK and EU over electricity could see cheaper energy bills for Northern Ireland households.

NI's energy regulator has recently told MPs that one inadvertent consequence of Brexit is that electricity in NI is more expensive than it should be.

In a joint statement with the European Commission President Ursula von der Leyen, both she and Sir Keir said they looked forward to a UK-EU summit later this year, where an electricity deal could be discussed.

"We agreed on the importance of being ambitious in what we could achieve together for the benefit of both sides," they added.

But could those potential benefits see cheaper electricity bills in NI?

NI's energy regulator John French said wholesale electricity prices in NI are 20% higher as a result of how Brexit disrupted the market.

Those wholesale costs make up about half of a consumer bill so a 20% saving would be significant.

French said that successfully tackling the issue "would be a huge benefit."

Northern Ireland's electricity market is in a unique position.

NI is part of the UK but is not part of the UK's electricity market.

Instead it forms a market with the Republic of Ireland called the Single Electricity Market (SEM).

The SEM was designed to be integrated into the EU Internal Energy Market (IEM).

Before Brexit both the SEM and the GB market were part of the EU's "market coupling" system.

They used the same EU-wide software and legal rules to "talk" to each other, allowing them to act as if they were one giant market.

That allowed electricity to be traded very efficiently across interconnectors, the undersea cables linking the markets.

After Brexit the UK chose to "decouple" from the EU's internal energy structures.

That also had the effect of decoupling the SEM from the GB market.

Trading across interconnectors still takes place but in a more cumbersome, less efficient and more expensive way.

French was clear about what reversing this would mean: "If we were to recouple, it would probably be up to a 20% reduction in wholesale electricity prices in Northern Ireland. That would be a huge benefit.

"At the moment, the wholesale prices on the island of Ireland are 20% more expensive than those in GB, so that recoupling would enable that reduction to take place."

The island of Ireland currently has no direct electricity interconnection to the EU.

A link between Cork and France is under construction but is not due to start operating until 2028.

That means any electricity flow from the EU currently come through the "decoupled" GB market.