18 hours ago
Consumers will foot bill for clean energy transition but still not clear how high bills will rise
Paying for Ireland's transition to clean energy will ultimately fall to consumers, but the extent to which household bills will rise is still unclear, according to a new report from the
National Economic and Social Council
(NESC).
The report, Connecting People to the Energy Transition, is based on in-depth research and consultations with households, energy communities, policy makers and research experts.
It identifies a range of challenges to be addressed, including energy affordability and the persistent issue of energy poverty for vulnerable groups.
It also says households face barriers including high upfront costs, complex grant processes, uncertainty, and practical issues.
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Households are largely 'in the dark' about their energy use, the report argues, and are not yet benefiting from some of the new opportunities from electricity usage such as dynamic tariffs and energy sharing.
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Furthermore, extreme weather events are highlighting the need for energy resilience at a local level. In addition, energy groups are 'facing barriers' to delivering projects to generate energy.
The report calls for a 'fundamental shift', urging policy and practice to place people and their wellbeing 'firmly at the centre'.
It says the priority must be on safeguards from price volatility, particularly for vulnerable groups. Addressing the long-term costs of the transition and how they will be shared is 'crucial' and requires a clear approach 'beyond consumer bills'.
Furthermore, barriers to clean heat and energy efficiency 'need to be addressed' by scaling up energy efficiency and transitioning to clean heat like heat pumps and district heating.
Households can become 'more active participants', while increased measures to ensure equitable access for all could be supported by secure application of digital and artificial intelligence technologies.
On consumer bills, the report notes additional costs are attributed to 'capacity payments', estimated to be a fifth of recent price rises and which have reportedly doubled in the past six years.
'These are payments to electricity providers, including data centres, for being available to supply power when it is needed, and a component of the price of electricity,' the report says.
'Reports suggest that, between 2007 and 2018, bill payers paid about €5 billion in capacity payments, an average of €454 million a year.'
Further costs to be met include repairs to the transmission system after extreme weather events. 'While this is not expected to be passed to households in 2025, it is not yet clear how these costs will be shared going forward,' the report says.
'More broadly, bill payers will be meeting the costs associated with the offshore wind infrastructure, grid resilience, and planned gas generation capacity, as well as the costs associated with the delayed North-South interconnector.
'It is not clear how much would be added to household bills or to Exchequer costs, thus raising an affordability risk.'
The report says tenants in the private
rented
sector are some of those most at risk of energy poverty, yet this is one of the most difficult tenures to improve because of the 'split incentive' problem where tenants and landlords both lack incentives to upgrade buildings.
ESRI research has shown that it would cost landlords €7 billion to €8 billion to raise the roughly 250,000 rental properties with below B ratings to B2 standard.
'Housing in the private rented sector is more poorly insulated and less energy-efficient than similar properties in the owner-occupied sector,' the report said.
An estimated 80 to 85 per cent of private rented dwellings currently have a BER rating below B – about 240,000 to 260,000 properties.
Compared to owner occupiers, renters were far more likely to be unable to keep the house adequately warm (9.4 per cent compared to 2.9 per cent) or go without heat (13.2 per cent compared to 6 per cent).
'The residential sector must rapidly scale up efforts to replace fossil-fuel heating systems and increase energy efficiency as it contributes to nearly a tenth of Ireland's greenhouse-gas emissions,' the report added.
