Energy consumers still in the dark on cost of renewable scheme

Cantillon: Homes and businesses will pay for new supports through a levy on their bills

New price supports are based on an auction system that favours cheaper, more efficient energy generators. Photograph: iStock.

New price supports are based on an auction system that favours cheaper, more efficient energy generators. Photograph: iStock.

 

* More than 80 energy businesses will be celebrating news that they qualify for price supports under the Republic’s latest scheme to boost the provision of low-carbon electricity.

Over the 12 months to next October, Irish families and employers will have paid a total of €176 million to support existing green energy generators, mostly onshore wind farms, that supply electricity in the Republic. That works out at €5.68 on each home’s electricity bill.

An Irish Wind Energy Association report found that homes and businesses contributed €1.9 billion in price supports to green electricity producers up to 2018. At the same time the study found that wind energy cut electricity wholesale prices to the point where the net cost of price supports was €65 million.

While that is a lot less than €1.9 billion, it is still a lot of money, paid on top of the actual cost of energy. Similarly, the calculations of what electricity would have cost if the wind energy suppliers supported by the extra levy not been there can only have been hypothetical.

The same homes and businesses will ultimately pay for the new support scheme, announced this week, through a levy called the public service obligation added to their bills. This levy supports existing projects as well, so the cost of the new scheme will be added to this.

However, this time the Government and industry assure us it will be different. The new price supports are based on an auction system that favours cheaper, more efficient generators, so it should cost less. Unlike the existing scheme, any cash left in the price-support kitty will be returned to electricity users.

That at least is positive news. But it does not get away from the fact that families and employers will be paying extra cash to big energy companies, State-owned ESB, German giant Innogy and Norwegian player Statkraft among them, to produce green electricity.

This will cut greenhouse gas emissions, already environmentally costly and set to be financially so, from electricity generation. Nevertheless, the Government is obliged to ensure that the new scheme’s cost will not end up being too onerous on homes and businesses.

The only proof that the Government is meeting this obligation will come when the scheme is up and running, and we see the cost for ourselves.

* This copy was edited on August 6th, 2020 to corrct the figure for price supports

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