Pre-Budget Submission 2024

Let’s not risk the Energy Transition

Introduction

In the Pinergy Pre-Budget 2023 submission last year, we highlighted the challenges in the Energy marketplace both in Ireland and across Europe. At that stage, wholesale energy prices were on a rising trend following the end of Covid restrictions & geo-political agression, which was followed by the escalation of the war in Ukraine and ultimately contributing to an inflated and volatile energy marketplace in the Autumn of 2022.

The Energy Crisis across Europe was a common talking point across politics, media and society; the wholesale energy markets were unstable at all time highs and consumers were fearful.

Twelve months on, energy prices remain elevated and are likely to remain so for some time to come. We believe that Irish energy users are paying too much for their electricity and much of this is to do with market structures unique to Ireland.

Wholesale energy prices have fallen back but remain subject to geo-political and climate factors. This summer has once again proven that climate change is a reality across Europe. The response from Government during 2022 and 2023 to protect citizens and businesses from the worst impacts of the energy crisis with a range of supports was timely, welcome and very important.

From crisis comes opportunity

However, the crisis continues, and we need to start addressing the big issues that could put the Energy Transition in Ireland at risk.

A ‘crisis’ focused implementation of the Energy Transition would lead to a return to cheaper but cleaner energy for homes and businesses. Reducing emissions from Energy and Electricity generation is not easy and will take investment of key resources, but it is possible.

Electricity is the backbone of the Irish economy. When industries don’t have access to cheap forms of renewable electricity, our economy suffers. In the past year, we have seen inflation increase, causing homes and businesses to face rising costs as consumers are footing increased energy costs both at home and in their consumption of goods and services. This has been a contributing factor in rising cost of food and other essentials, putting the Cost of Living at the heart of current discourse.

In the past 12 months we have also seen increased interest rates hit homes and businesses as the cost of credit has jumped significantly. This has put more pressure on cashflows for homes and businesses, meaning less disposable income every month, which over time will impact on investment decisions and economic activity.

Investment decisions in energy are important and the State has the benefit of a significant surplus to invest wisely. For Budget 2024, we are recommending a mix of short-term supports for energy users as well as longer term investment into our energy infrastructure and services to accelerate the energy transition.

While price reductions have commenced, volatility remains high and is reflected in long term energy costs and risk profiles. In the short term, we would welcome continued supports for Electricity users over the winter months. The Credits for Domestic customers over 2022/23 were very welcome and timely. We would welcome an extension of this scheme into the winter ahead with a focus on both universal and targeted measures. The Temporary Business Electricity Support Scheme (TBESS) was welcome as well, but hopefully a simpler qualification and application process will encourage stronger take up this winter.

Proposals for Budget 2024

Our proposals for the forthcoming budget are based on protecting and promoting a just & fair energy transition for homes and businesses across the country.

To mitigate the risk of not achieving the energy transition, we believe that four steps need to be taken;

1. Reform

2. Invest

3. S olar

4. K nowledge

1. Reform electricity market structures

Pinergy has long advocated for structural reforms of the Electricity market. These reforms are focused on delivering a fair and competitive marketplace that ensures clean and reliable electricity for homes and businesses. Unfortunately, despite much promises we have seen no real progress on structural reforms in the last 12 months.

We would like to see funding allocated to a review of the current Electricity market to ensure the marketplace is fit for purpose in the current environment. The market was deregulated over twenty years ago, but the challenges faced today are very different from those of the early 2000s. Any review and ultimate reform of the market should cover the following areas:

• We believe that a Department of Energy Transition would become a centre of excellence for Ireland to be a leader in the new energy markets. This Department would focus on leveraging our capability to build offshore energy resources to support the existing development of onshore renewables. There is a case that our geography creates a unique opportunity for Ireland to be a net producer of renewable energy. A focused ownership with fast-track reforms to deliver the transition is now urgently required.

• The State has an important role to play in the energy transition through the development of policy, regulation and management of key infrastructure, including the Irish Electricity Grid. However, we believe that the State needs to play a new role in the marketplace to facilitate more competition and promote more investment. We have seen a number of international and domestic retail suppliers enter and then exit the market due to marketplace structures.

• The proposed Energy-Cap on renewable producers of Electricity has not been implemented yet. We would like to see this cap put in place to ensure that if we do see an escalation in pricing again, that one part of the market is not making ‘super normal’ profits at the expense of electricity users (Homes & Businesses).

• Finally, we would like to see the Budgetary surplus in part used to fund Energy Transition Projects to improve liquidity to market participants. The traditional banking sector is not delivering the innovation & scale needed in the energy sector to allow our climate targets to be met.

2. Investment in the Electricity Grid

Electricity is the backbone of the Irish Economy. However, the Grid is not fit for the circular future of electricity. We would like to see significant capital investment into the Grid from the Budget surplus invested into our energy futures. This investment should be in excess of €2bn to reflect the importance and urgency of this need.

• We believe that additional resources & infrastructure are needed to support connections to the Grid and the ability for microgeneration projects to add further capacity of renewables. To put this into context, we have a number of commercial clients who are still waiting for connections to the Grid for microgeneration projects, and in some cases, they have waited over 12 months. There is no capacity on the grid in certain areas and this requires more investment.

• Investment in the Grid should be accelerated to make it fit for the future. Investment with a focus on connecting renewables must be a priority, particularly with the off-shore opportunities that are ahead. There is no point investing in Generation assets if we can not transport the additional electricity through the Grid.

• An accelerated deployment of Smart Meters for Business must be a priority to ensure businesses can see their consumption and actively optimise their electricity usage patterns and benefit from self-generation opportunities.

• The Grid investment needs to be also ready for the migration of heating and transport to electricity. We’re beginning to see more adoption of Electric Vehicles as well as a slower adoption of technologies such as Heat Pumps. The Grid needs to be ready for these energy supply demands from these technologies. We would also encourage further investment and incentives in Electric Vehicle charging infrastructure to meet the demand of the growing number of EV drivers. Demand from consumers is there, but the Grid is being tested.

• Finally, we would like to see the Public Service Obligation levy renamed as a Renewable Energy levy to better reflect its purpose and its outcome to encourage adoption of renewable energy sources.

To drive longer term, fairer pricing for electricity users, Government must invest in the Grid now. Security of Supply is key to economic progress. We need a grid that is transformed to deliver clean, green electricity to meet increased demand as we transition from fossil fuels. A Grid that is modern, agile and circular. A renewable generation fleet that is backed up by adequate gas infrastructure. One that is ready for today and tomorrow. Investment is required now and over the next decade.

3. Solar – the alternative renewable

Renewable energy has for many years been focused on Wind. This has been to such an extent that 80% of renewable energy is wind.

We believe the key to building an alternative renewable source, at scale and quickly is Solar Energy. Over the past 12 months, there have been welcome changes to Planning regulations, a reduction of VAT to zero and the wider availability of Grants which have accelerated the adoption of Solar Energy across the country. However, we believe more can be done.

• In order to ensure that Ireland has a balanced approach to renewables, we need to see further incentives and investment opportunities to generate electricity from solar at scale.

• We would like to see investment into planning regulations to mandate the inclusion of Solar PV on all new commercial buildings. This has the opportunity to build the Solar Energy estate for the country giving us greater energy independence.

• We would like to see sustained long-term funding into the commercial solar sector. The existing grants are excellent and fit for purpose but business owners & the solar sector need certainty that this funding will be available long term in order to support rollout of large & small projects. We need a commitment that Grants will be available for the next 5 years at least.

• The majority of the businesses still don’t fully understand or appreciate the true impact of solar on their operating costs and sustainability approach. We would like to see investment in educational resources and awareness campaigns in this area. Only 3-4% of commercial rooftops have solar to date. There is a significant journey to go.

• Further investment in ESB Network resources across people, skills and technology to accelerate the benefits of export grid connections to businesses of all types and scale. The Energy Transition needs to be accelerated to include commercial solar connections.

• We believe as the Solar Energy market has grown significantly in the last 12 to 18 months, we would like to see investment into the regulation of the retail microgeneration sector. There are a wide variety of suppliers in the sector with varying levels of work quality, health & safety and after-sales service. We would like to see investment made in the regulation of the private microgeneration (Solar, Wind etc.,) sector to give a common set of standards for projects at all levels.

• Finally, we would like to see investment to accelerate the development of energy communities to allow peer to peer trading and private wire arrangements over extended distances.

4. Knowledge of energy

Finally, we would like to see a national conversation on our Energy Futures. What is clear is that everyone in society has a role to play in the future of energy, but most are unaware of their needs.

Last winter, ESB Networks ran tactical campaigns to ‘reduce your use’ and to become more aware of their consumption. However, a longer narrative is needed to paint a picture of the future of energy.

• Investment in national campaigns to build support for the energy transition and what it means for every electricity user. This campaign would communicate the benefits of the energy transition to the population but also the issues if key areas are not addressed.

• Acceleration of the final rollout of Smart Meters to homes across Ireland to be completed over the next six months so every electricity user can see their energy consumption and plan accordingly, together with a programme to rollout Smart Metering to non-domestic buildings.

• Our proposed Department of Energy Transition should take the lead in building an energy knowledge programme.

Conclusion

Ireland has a unique opportunity to be a world leader in clean, renewable energy. It is a sector that can deliver jobs & opportunities that can only be delivered in the next decade. The Climate Action Plan and legislation is very welcome and investment to date is driving change, however, we need to accelerate and put renewed focus on the challenges of Climate.

This Summer, we have seen climate records broken in Ireland, Europe and all over the world. Climate extremes are no longer rare, but regrettably becoming normalised.

Let’s not RISK the Energy Transition for another year. Make the Change and Invest for the future.