Eamon Ryan: Windfall tax will be used to protect energy consumers from high prices

Eamon Ryan said the tax will “claw back” excess profits from energy-generating companies who are not using gas. Photo: Gareth Chaney/ Collins Photos

Ireland could collect anywhere from €340 million to €1.9 billion from a windfall tax and solidarity contribution from energy providers, money which the energy minister says will be used to "protect" consumers.

Cabinet on Tuesday signed off measures including a cap on all market revenue on non-gas electricity generators, and a temporary solidarity contribution for companies active in fossil fuel production.

Energy providers will be subject to the windfall tax if their revenues go above the cap but will be able to avoid it if they can prove that they have passed the excess revenue on to customers in the form of lower prices.

Eamon Ryan said he would like to see the money raised through the cap, which will see 75% of any profit earned that is above 20% more than the 2018-21 average, ringfenced to help people in the current energy crisis. However, he cautioned that there are a number of variables that will affect the final income level.

The moves agreed at Cabinet include:

• a cap of €120 per MWh for wind and solar;
• a cap of at least €180 per MWh for oil-fired and coal-fired generation;
• a cap of €180 per MWh on other non-gas generation.

These will kick in on December 1, the Department of Environment said.

Speaking as the package of moves was announced, Mr Ryan said the tax will “claw back” excess profits from energy-generating companies who are not using gas.

“It’s a great progressive, further, additional piece of the jigsaw that this Government has put into place to protect our people through this extraordinary high energy price period,” Mr Ryan said. He said the entire concept was designed to give the Government funds to raise funds for additional one-off energy measures.

“This has not been done to raise revenue for the State, for the general Exchequer,” Mr Ryan said. “It is to give us a pool of funds that will help us to take further measures when it comes to protecting people from energy costs.”

However, the tax "is a drop in the ocean but not going to be the dig-out that we need," according to a University College Cork researcher.

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Dr Paul Deane, who is a senior researcher in clean energy futures with Science Foundation Ireland's MaREI Centre, said the idea of a windfall tax is politically and publicly very appealing. However, he believes that it is unlikely to be a "panacea" to the energy crisis we are having in the country at the moment.

"If we take this figure of €1 billion it sounds like a lot of money, but if you were to spread that around all the families who use electricity in Ireland that would reduce a monthly electricity bill for a family by about €40 a month," he said,

"Now that is helpful, but it is certainly not the dig-out that we need and certainly not going to offset the massive increases in our electricity bill that we have all seen over the last 12 months. But it is helpful. It is something necessary to do."

Dr Deane says that the estimate that this move to cap windfall gains could generate up to €1 billion in revenue for the State is "incredibly optimistic".