Windfall tax 'not going to be the dig-out we need,' says UCC researcher

Dr Paul Deane, a senior researcher in clean energy, said the idea of a windfall tax is politically and publicly very appealing, but is unlikely to be a "panacea" to the energy crisis

Dr Paul Deane believes the Government should look at assisting the most vulnerable in society through the energy crisis. File picture

A planned windfall tax on electricity companies set to be signed off by Cabinet today "is a drop in the ocean but not going to be the dig-out that we need," according to a University College Cork researcher.

Dr Paul Deane, who is a senior researcher in clean energy futures with Science Foundation Ireland's MaREI Centre, said that 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. 

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

"If we take this figure of €1bn 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.

"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."

He told RTÉ radio a lot of companies are using excess revenue that they are making on the generation of electricity to offset losses or to push up against increases in electricity bills for customers.

Now that might sound unusual given the incredible electricity price increases we have all seen over the last number of months, but if Irish families and Irish firms were fully exposed to the commodity prices we have seen in the international market at the moment we would expect Irish electricity prices to be higher.

"I think a lot of this is actually happening behind the scenes already and I would expect a much lower value than €1bn to materialise."

Dr Deane emphasised that it is important to "manage our expectations" about what a windfall tax and surplus contribution on energy companies could achieve. Instead, he believes the Government should look at assisting the most vulnerable in society through the energy crisis.

"The expectation of windfall tax — often that narrative doesn't play out in the numbers we see.

"What we are doing around direct payments to families is a good idea, but it needs to be improved. It needs to go to targeted families who need it. Giving every family three payments of €200 is politically popular but it is not dramatic, and it is not sustainable."