Irish Energy Policy Reviewed

The economic crisis, the evolving EU policy context and recent developments in technology require new approaches to domestic energy policy, according to a new report – A Review of Irish Energy Policy – by the Economic and Social Research Institute (ESRI). While the objectives of policy remain the enhancement of competitiveness, ensuring a secure energy supply, and tackling the problem of climate change, the changing external context requires some new solutions.

According to the ESRI, one of the key successes of Irish energy policy in recent years was the implementation of the Single Electricity Market on the island of Ireland. It has ensured a secure supply of electricity at a competitive price since 2007. However, new developments at the EU level may require a change in the market structure to facilitate trading in electricity across the EU and it will be important to ensure that the enhanced integration of the Irish electricity system with that of North-Western Europe benefits Irish consumers.

Even if oil and gas prices result in higher electricity prices in the future, it is not sensible to use scarce resources to subsidise electricity prices, says the ESRI. Furthermore, any windfall gains from free electricity permits should accrue to the exchequer.

The report also points out that while current policy on promoting renewable electricity may be broadly consistent with the strategic aims of Irish energy policy, there are aspects of market design and of the support scheme for renewable energy (REFIT) which could result in substantial unnecessary costs falling on Irish consumers. The current support scheme for onshore wind is probably too generous – the additional sum payable where prices are high should be dropped for new investors, argues the report.

The ESRI also maintains that incentives for offshore wind and wave and tidal generation are not appropriate as it is premature to incentivise substantial investment in such technologies. This aspect of current policy could prove very expensive for the Irish economy, while bringing little or no environmental benefits. The Irish electricity market may also need to be adjusted to ensure that the level of investment in intermittent renewable generation is appropriate.

The ESRI report urges Ireland to contribute to a review of EU policy on renewables, as current European policy is likely to increase the cost of reducing emissions while providing limited security of supply advantages. While the costs to Ireland from the inappropriate configuration of EU policy may be small, the potential costs to the EU economy as a whole are likely to be significant. Ireland should also contribute to the next stage of EU policymaking to ensure that the approach to managing greenhouse gas emissions from agriculture is efficient from both an economic and an environmental point of view.

EU policy on energy security is developing in the light of changing circumstances. The extension of the current arrangements for cross-country co-operation in the event of a shortage of oil to the gas market is important for Ireland. It is to be welcomed that the EU is also developing clear rules on gas transmission through member states. Domestic security of energy supply requires that the Corrib gas field is brought to production as rapidly as possible, says the ESRI.

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