It's 'challenging' to explain why Ireland's electricity prices are above other countries, says ESRI
In the body's opening statement, it sets out that the Irish economy will face 'headwinds' in the months ahead due to growing global uncertainty.
Specifically addressing energy costs, the ESRI states that Irish energy prices have declined since the heights of the energy crisis in the wake of the war in Ukraine, but despite this, the prices paid by consumers remain at high levels.
'Prices for electricity in particular have not yet declined to the same extent as other EU countries.
'It is challenging to confidently identify the reasons for this, but prices are still largely driven by gas prices, and Ireland has not diversified away from using gas to generate electricity to the same extent as other EU countries,' it states.
In May, a Eurostat survey revealed
that Irish consumers pay the third-highest costs in Europe for electricity.
It found the average Irish household is paying approximately 30% more (around €347 more) per year for electricity than the average EU home.
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The ESRI will tell committee members today that large investments in the electricity grid are required in order to meet growing demand, diversified supply, and to improve efficiency in the network, and the cost of subsidising renewable energy is also likely to increase.
This means the cost base of electricity is projected to shift away from variable costs and towards fixed costs, which the ESRI states is 'good for consumers, as it reduces exposure to high price spikes' .
However, it goes on to say in its statement that it 'may be regressive, depending on how these fixed costs are recovered by energy companies'.
Network tariffs should be designed taking these contributions to costs into account, said the ESRI.
Energy Minister Darragh O'Brien told
The Journal
last month
that he had set up an affordability task force within his department to look at options on how to drive affordability.
The cost of electricity for Irish customers is still linked at European level to the wholesale gas price, said the minister.
O'Brien said he has raised the matter with the European Commission on how to break that link, but said it is a 'medium term' body of work that is needed before any changes will be seen.
'More EU states like Ireland are now producing more renewable energy, yet the energy cost itself is still linked to the wholesale gas prices. So that's something that at an EU level, I can't change that independently for Ireland, that's something that we will be having discussions on at an EU level,' said the minister.
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