|Global Energy Network Institute (GENI) ocean energy map.
A single EU electricity market may result in
higher costs for Irish consumers, according to the Economic and Social Research
Institute (ESRI) in a paper published today. The paper says incentives for wind
and wave and tidal generation should be scrapped.
The paper, A
Review of Irish Energy Policy (the link to the report should be activated on
the ESRI page on Wednesday), says the all-Ireland electricity market, which
dates from 2007, is working well and it concludes the price of electricity is
about right as a result. However, it points out that the EU is moving rapidly
towards an integrated electricity market, and sees the development as likely to
create extra costs for Irish consumers.
The paper, authored by Prof. John FitzGerald, says the context for Irish energy
policy has changed dramatically in the last four years. The economic crisis, the
evolving EU policy context and recent developments in technology require new
approaches to domestic energy policy. 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
FitzGerald says that 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. Furthermore, any windfall
gains from free electricity permits should accrue to the exchequer.
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. FitzGerald says 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.
Prof. FitzGerald says 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.
Ireland should 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.
The paper says 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.