Aspects of Irish Energy Policy

September 07, 2005

News

07/09/2005



Aspects of Irish Energy Policy

Embargo: Wednesday 7 September, 2005 at 00.01a.m.
By John Fitz Gerald, Mary Keeney, Niamh McCarthy, Eoin O'Malley and Sue Scott (ESRI).

Members of the Press are invited to attend a Press Briefing, to be held on Tuesday, 6 September 2005 at 11.00 a.m in the ESRI, 4 Burlington Road, Dublin 4.

Today the ESRI launches a major report on Aspects of Irish Energy Policy. Building on the wide range of research undertaken by the Institute's Energy Policy Research Centre in recent years the report considers how Irish energy policy can best deliver a competitive and secure energy supply consistent with Ireland's environmental obligations. Key findings are:

  • To ensure that increasingly expensive energy resources are allocated in an optimal manner it is essential that business and households should pay the full economic cost of energy: there should be no explicit or hidden subsidies. The counterpart to this prescription is the requirement that a secure energy supply should be delivered with maximum efficiency: there should be no unnecessary costs for consumers.
  • The demand for energy, and for electricity in particular, will continue to rise quite strongly well into the next decade. Major investment in new electricity generation capacity and transmission is needed, particularly in light of increasing wind penetration. At the same time, Ireland is likely to increase its dependence on gas to supply its energy needs over the next decade and the government should consider strengthening the crucial gas transmission network.
  • Fuel diversity and financial instruments both have roles to play in protecting Ireland against the risk of oil or gas price shocks.
  • An all-island electricity market is likely to confer significant benefits on consumers, reducing the long-term cost of providing a reliable electricity supply below what it might otherwise be.
  • The structure proposed for the all-island electricity market by the two regulators is likely to provide the best opportunity for securing a competitive supply of electricity for consumers on the island of Ireland over the next decade.

To ensure adequate incentives to invest and to promote competition:

  • The operation of the new All-Island market structure should prompt a significant closure of old inefficient plant and replacement by new plant, built by different operators. Together with enhanced interconnection to Britain, this should see the ESB's dominant position in the generation sector on this island substantially eroded by early in the next decade.
  • The ESB should sell between 500 MW and 1000 MW of plant over the period to 2010. It should be allowed to replace some, but not all of this by new plant. Where possible, the ESB distribution and supply should move to buying in services on a competitive basis.

Global warming is the single most pressing environmental issue facing energy policymakers.

  • The EU emissions trading scheme, if suitably reformed should provide an appropriate instrument for implementing the Kyoto Protocol. However, as currently implemented by the EU it has some serious defects.
  • Unless Ireland introduces a carbon tax for sectors not covered by emissions trading it will either miss its emissions reduction target or else the cost of meeting it will be excessive.

Energy efficiency has an important role to play in reducing costs, increasing competitiveness and protecting the environment:

  • Policies to promote energy efficiency have been directed mostly at the industrial sector, commercial and institutional sectors and at promoting renewable energy. Energy conservation in transport and by households is relatively neglected.
  • The sensitive application of economic instruments would reinforce the benefits of regulations and would encourage the take-up of energy efficiency advice.