Cabinet warned move from fossil fuel reliance will lead to higher costs for consumers in near future, writes Hugh O’Connell
Ireland’s commitment to deliver 80pc of electricity from renewable sources by the end of the decade will “inevitably” lead to even higher costs for consumers in the near future, ministers have been warned.
We can reveal details of the stark warning given to the Cabinet about the more immediate consequences for households already facing soaring energy costs due to rising inflation as a result of the State’s move to more than halve greenhouse gas emissions.
“The challenge that Ireland faces to increase our share of renewable electricity up to 80pc over the decade, against a backdrop of high electricity demand growth, is unprecedented and will inevitably lead to higher costs to consumers in the short term,” ministers were told.
The warning was contained in a memo outlining details of the final results of the second onshore Renewable Electricity Support Scheme (RESS 2) auction, which aims to bring more indigenous wind, solar and hydro-electric energy on to the national grid.
While this ultimately will reduce the State’s reliance on more expensive imported fossil fuels, the short-term impact is likely to hit consumers who have already seen their household gas and electricity bills soar over recent months.
Around 40pc of electricity comes from renewable generation, and ministers were told climate targets will inevitably lead to price increases — and this “may have consequences for energy poverty, depending on the allocation of costs across consumer groups”.
Details of the warning come in the week when the ESRI advised of record numbers of people being plunged into energy poverty, with nearly a third — 29pc — now spending more than 10pc of their net income on energy bills.
If energy costs increase in the coming months at the rate they have over the past year, households face paying as much as €2,000 a year more — or over €3,500 when the cost of petrol and diesel is included.
The memo for ministers insisted the switch to renewable energy generation such as wind and solar would provide a “long-term shield” from volatile international fuel prices.
It also asserted that the “costs incurred through renewable energy investment such as that delivered through RESS are expected to be more than offset by longer-term benefits of decarbonising the electricity grid”. It also highlighted how building wind farms and grid scale solar projects can deliver significant levels of employment in construction and maintenance.
RESS 2 will see up to 3,500 jobs created during the construction phase and more than 300 long-term jobs delivered in smaller rural communities for the operation and maintenance of these facilities. Around €230m in tax receipts could also be generated over the lifetime of the projects, the Cabinet was told.
In a bid to partially offset rising energy costs, the Government also agreed measures last week that could save consumers up to €127 on their electricity bills later this year.
Plans to allow the Commission for Regulation of Utilities (CRU) to set the Public Service Obligation (PSO) levy, which is used to support renewable electricity generation, on bills to a negative rate are expected to increase the annual saving by as much as €75 on top of the €52 already being saved by the PSO dropping to zero.
The CRU is due to rule on the final saving by the end of next month and will take effect from October for the following 12 months.
However, ahead of the budget in October, the coalition is under mounting pressure to introduce more immediate measures to alleviate the burden on households struggling with the impact of inflation.
In its report on energy poverty that was published last week, the ESRI suggested the possibility of a Christmas bonus-style double welfare payment to offset rising energy bills, arguing it would result in gains that are bigger in both cash terms and as a percentage of income for lower rather than higher income households, as well as those at risk of poverty.
On Thursday, Tánaiste Leo Varadkar left open the possibility of further measures being announced in the coming weeks.
“I’m not ruling out doing things in the interim, but certainly at this stage what we are working towards is another package of measures to help people with the cost of living and that will be on budget day, which is just over three months away,” he said.
However, senior figures on the Fianna Fáil side of the coalition are continuing to rule out the prospect of further measures between now and the budget.
“The Government is extremely conscious of the cost-of-living challenges for everyone — and will help alleviate these in a targeted way in the budget,” a Fianna Fáil source said yesterday.