Britain faces new risks in Europe interconnector plans

By Nina Chestney and Susanna Twidale LONDON (Reuters) - British plans for more power links with Europe to avert a looming electricity shortfall could be hindered if the country no longer has a say in European Union regulation of networks and power trading. Britain faces an energy supply crunch by the early 2020s as coal power stations close and its oil and gas production declines. To help it plans new interconnectors with France, Denmark, Belgium and Norway to provide up to 14 gigawatts of additional capacity. Its current four interconnectors with Europe provide around 4 GW of capacity. But if Britain leaves the EU, it might have to leave the bloc's rule-making internal energy market (IEM) which coordinates access to energy across the EU. European policymakers have been working on a common approach to wholesale energy markets and a rulebook for gas and electricity network operations. "The UK benefits from this integrated approach. All of these gains are now at risk, said consultancy PwC. "Brexit may have no impact on our ability to use the interconnectors. But it cannot make it easier for us to negotiate the delivery of essential power and gas at times when Europe as a whole is suffering shortages." Post-Brexit politics could also complicate plans. "It could get swept up into the larger debate of our positioning outside of Europe and get polluted by the wider political debate," said Alex Harrison, counsel at Hogan Lovells International. Ireland's EirGrid, which owns and operates the East-West Interconnector between Britain and Ireland, said Brexit would set back a decade of effort to remove barriers to energy trade. "As a TSO (transmission system operator) in Ireland and northern Ireland, Brexit (would place) ...a border between two parts of our business - right across what was, over the last 10 years, pushing towards having a single electricity market on the island," said Fintan Slye, chief executive of EirGrid Group. "I think the European framework was a huge part of what enabled it to happen," he said. UK grid operator National Grid said the commercial case for interconnector projects remained strong if Britain remained in the EU's IEM. "The IEM ensures the efficient flow of secure, sustainable and affordable electricity to the UK and enables the export of excess energy to mainland Europe," a spokesman said. Norwegian grid operator Statnett [STASF.UL] and Denmark's Energinet say Brexit would not affect their plans to build power links with Britain. Private company Aquind also said it still plans to develop a 2 GW interconnector between France and Britain. However, the cheaper electricity which the projects have promised may be at risk, in part because the pound could weaken against the euro. "We may face increased costs because we find it harder to benefit from the efficiencies which flow from cross-European coordination. Put simply, consumers' bills may be higher," PwC said. (Additional reporting by Nerijus Adomaitis and Alissa de Carbonnel; editing by Jason Neely)