In yesterday’s Sunday Times, that newspaper’s Political Editor Hugh O’Connell reported that the Government will react to last week’s energy price increase announcement by issuing homeowners with energy credits in the amount of at least €150, which will cost at least €300million and will see households receive money directly off their electricity bills.
In essence – given that the price increase announced by the energy regulator amounts to €100 annually per household – the Government is going to cover that cost, and pay the energy companies directly rather than see the cost passed on to consumers. It is probably good politics, but terrible policy, ironically being enacted to cover the inevitable result of previous bad policy.
The first thing to note here is just how expensive electricity is in Ireland: If you live in Utah, in the United States, you will pay about 10 cents per kilowatt hour. In Ireland, Electric Ireland was charging – before the recent price increase – 35.83 cents per kilowatt hour, before the standing charge that you pay annually. An Irish family will pay more than three times what a family in Utah will pay for turning on their lights, or their televisions.
What accounts for the cost differential? Several things, the first of which is that about half of electricity generation in the state of Utah comes from coal. In Ireland, we no longer generate any electricity from coal, having decided in our wisdom to choose cleaner, but more expensive alternatives. The second thing is that their primary source of renewable energy is simply more reliable than our source of renewable energy: In Utah they harness the sun, which reliably shines. In Ireland, we harness the wind which does not reliably blow. The third thing is that while Ireland is phasing out fossil fuels in favour of wind, Utah is phasing out fossil fuels (coal) in favour of Nuclear Power, with a major new plant coming on stream in 2032.
The scale of Irish subsidisation of wind energy is something of which very few voters are aware. First, there is the fact that wind and renewable energy drives up Irish electricity bills directly through the tax system: Every electricity customer pays a “Public Service Obligation” fee on their bill every year in the amount of €38 – this money is handed directly to renewable energy companies to offset the fact that their product is uneconomical compared to the alternatives. It is worth recalling at this juncture that way back in 2011, the Irish Academy of Engineering described wind as “an extremely expensive way of reducing greenhouse gas emissions when compared to other alternatives”, and described a target of having 40% of our energy derived from Wind as “unrealistic” as well as fantastically expensive.
That was in 2011 – not only did the Government ignore the Academy of Engineering, it actually increased the target for wind energy production. In 2020, we hit a high of 36% of our electricity being produced by wind – one of the highest in the world. The Government is determined to increase it further, with a target of 80% of our energy coming from wind and other renewable sources (of which there are few) by 2030. That is double the amount that the academy of engineering said would be uneconomical.
So let’s review the evidence: In 2011, the state was warned that driving up investment in wind energy would be uneconomical and expensive. By 2020 we had proceeded with the policy anyway. In 2024, the Government once again feels the need to spend hundreds of millions both subsidising the cost of Irish electricity, and subsidising households who have to pay the bills. Are we shocked by this?
The people running the country have embraced a policy of producing electricity in an uneconomical way, despite being warned that costs would rise. Costs have now risen. Now the Government is spending yet more money to reduce those costs for households.
As I say, this is good politics, in the short term. But we are only here because of awful policy over the longer term – and it is only going to get worse.
There were, of course, alternatives: Utah has a population only about 60% of Ireland’s – about 3.3million people – and yet it is constructing a nuclear power plant which will not only dramatically reduce emissions, but will produce cheap and clean and reliable electricity for decades to come, along with a surplus that can be exported. Ireland, by contrast, has invested tens of billions of euro in building wind energy which still requires fossil fuel backup for the many days in which the wind is too light, or too strong, or blowing in the wrong direction, or inconveniently timed. There was also the alternative of importing cheaper natural gas, via fracking, but this was eliminated by the present Government’s refusal of permission for the Foynes natural gas terminal.
At every step along the way, Irish Governments over the last decade or more have pursued – consciously and with foreknowledge – a policy of higher energy costs. They should not be permitted, I think, to turn around now and present themselves as champions of household bill reduction. After all, it’s just a bribe with your own money to cover up how much of that money that their policy has cost you.