Electricity prices must fall to keep multinationals investing here, IDA warns

The Republic must cut electricity prices while bridging the gap between demand and supply to ensure continued investment in job creation, development agency IDA Ireland has warned energy regulators.

The Commission for the Regulation of Utilities (CRU) is reviewing policies governing the connection of large energy users, including data centres, to the national electricity grid.

In a submission to the review, IDA Ireland, the agency responsible for luring overseas investors that employ more than 300,000 people here, says the Republic is at “critical juncture” in supplying energy to businesses.

“The gap between the current strong demand for electricity and potential strong supply must be successfully bridged,” warns the agency’s chief executive, Michael Lohan.

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“In addition, we cannot lose sight of our national competitiveness, the relative cost of electricity needs to improve considerably for our country to continue to win major foreign direct investment into the future.

“The National Competitiveness and Productivity Council in its June 2023 bulletin noted that Ireland ranked 41st out of 64 countries when it came to electricity costs for industrial users and energy infrastructure.”

Mr Lohan’s views emerged on Tuesday when the CRU published its own consultation paper on the review along with submissions from various interested parties.

[ Dublin still has highest electricity prices of all EU capitals despite latest fall ]

He argues that any State energy strategy should not single out extra-large and large energy users on the basis that success in limiting demand from them would have a “big bang impact” on decarbonisation and security of supply.

Mr Lohan maintains that any direction from the CRU needs to be based on partnership with stakeholders.

“Connection policy should facilitate enterprise development while working on a pathway to net zero,” he says.

The development agency chief stresses that his organisation’s client companies fully understand the challenge of climate change.

“We see first-hand the initiatives they are undertaking and how these are increasing in scale,” he says. “They will be part of the solution in Ireland given the breathing space to make it happen.”

In contrast, heritage body An Taisce argues in its submission that all further data centre building and connection should halt until the Republic has a new policy for the industry that accommodates its national, European and international emissions reduction obligations.

An Taisce maintains that data centres are diluting progress towards one of the State’s key climate action objectives: to produce 80 per cent of electricity used here from wind, solar and other renewables by 2030.

“The higher the total electricity demand, the more renewables capacity needed to reach the 80 per cent target,” says An Taisce.

“Therefore, the more energy intensive developments, like data centres, that come on stream, the more difficult it will be to reach that target.”

Its submission states that recent Sustainable Energy Authority of Ireland figures show the actual share of renewables has not increased here since 2020, largely due to data centres.

An Taisce also notes that the CRU acknowledges this problem in its consultation paper.

The organisation maintains that no data centres or other large energy users should be given permission or connection agreements where their own on-site generators are fossil-fuel powered.

Data centres must have their own electricity generators, which can meet their needs and supply the national grid, before getting connections.

Controversy blew up around data centres three years ago when national electricity grid operator EirGrid voiced concern to the regulator about the amounts of energy these facilities consumed.

The row came as electricity prices were beginning to climb and it emerged that the Republic’s demands were rising rapidly while supplies were coming under increasing pressure. EirGrid has warned that a squeeze on electricity will continue into the next decade.