Warning over hike in energy prices

Irish consumers could be hit with significantly higher energy prices as a result of a single European electricity market, a leading economic thinktank has warned.

In a newly published research paper on EU proposals for an integrated European electricity market, among all member states, the Economic and Social Research Institute (ESRI) said that while the proposals could result in greater trade, “it could come at the cost of significantly higher prices in the domestic market”.

While the institute didn’t place an actual figure on its outlook, it said current proposals could lead to an increase of a few percentage points in average bills.

Full single-market integration has been moved out until 2016, but the problem felt by many — including the ESRI — lies not in the idea of a single market, per se, but in the complex new energy trading rules each member state needs to adhere to, which in many cases will bring about a complete change to the workings of their electricity markets.

To that end, the ESRI is calling on Government to appeal to the EU for a change to the proposed rules and to formulate an alternative policy plan.

“The correct approach is to delay making a decision and, in conjunction with the EU, to seek to identify a more appropriate model that will be likely to benefit consumers in Ireland and elsewhere in the EU,” said ESRI research professor John FitzGerald, who said research backed up the theory that the new system doesn’t benefit Ireland.

“Job creation in the energy sector is not, and should not be, the objective of energy policy. Instead, the objective should be to deliver a secure and environmentally-friendly energy supply to Irish consumers at a minimum cost.”

Prof FitzGerald said that a major task for energy policy in the next 10 years would be the successful delivery of appropriate infrastructure needed to meet policy objectives.

In this regard, he highlighted such projects as the North-South electricity interconnector, bringing the Corrib gas field into production, and increasing interconnection between the Irish electricity system and the rest of Europe.

According to the ESRI, the objective of safe, affordable, and sustainable energy is dependent on the delivery of key infrastructure.

In its paper, the ESRI also called the current model of subsidisation for renewable energy projects as “regressive”, saying increasing costs should be distributed in a more equitable way.

“The increased penetration of renewables in Irish electricity is subsidised by a fixed charge, paid by all consumers. The authors recommend that policymakers examine more equitable ways to distribute these costs, with particular attention to protecting vulnerable groups,” it said.


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