IDA clashes with electricity regulator over moves to impose penalty tariffs on big business

IDA Ireland has clashed with electricity market supervisors over moves to impose penalty tariffs on big business to avert the threat of winter blackouts.

The State’s inward investment agency said it was essential to maintain competitive pricing for energy “at all times” as it expressed anxiety about growing constraints on the national power grid. “IDA Ireland is very aware of clients’ concerns around security of energy supply,” it said in reply to questions from The Irish Times.

The IDA ranks among the most powerful State agencies because of its relationships with 1,700 multinational clients whose 275,000 employees make up about 11 per cent of the workforce. The agency’s public stance sets it against measures proposed by the Commission for Regulation of Utilities (CRU) to ease winter demand for electricity.

The CRU wants to impose “peak tariffs” on large industrial consumers, pitching prices at levels so high they would have no option but to cut demand on the coldest winter nights. Such measures would hit big electricity consumers such as data centres, whose rapid expansion in recent years spurred the surge in power demand that outpaced growth in generation capacity.

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A formal consultation on the CRU plan begins within weeks amid unease in the Government that there will not be enough emergency generation in the system when winter demand peaks.

“From IDA’s perspective, security of supply of energy is paramount. The situation with respect to the availability of energy, particularly electricity, is serious and is of particular concern to large energy users,” the agency said. “Accordingly it is imperative that all measures are taken by the relevant stakeholders to ensure that ample, competitively-priced energy is available at all times for the [foreign direct investment] base.”

Both the CRU, which oversees the market, and EirGrid, which runs the network, acknowledged the constraints.

“With the increase of renewables on the system, demand-side participation by customers will become increasingly important,” the CRU said.

“The consultation will put forward a number of demand-reduction measures, under the national energy security framework, to develop options that will lower demand in peak periods, reduce demand growth and incentivise demand flexibility in times of system stress and when there is a low contribution of renewables.”

In addition to looking at large energy users the CRU will examine steps to cut peak domestic and small business demand.

Although EirGrid is commissioning emergency generators there are concerns that capacity might still fall short this winter.

“Margins will remain tight during the winter period 2022/2023 and the CRU is continuing to work with key stakeholders to implement additional appropriate mitigation measures to further reduce risk during this period,” said the Department of Environment, Climate and Communications.

More backup capacity will be secured for the winters of 2023/2024 to 2025/2026 to mitigate any potential threat of a shortfall, the department added. “Concerns over such risks had arisen largely due to non-delivery of previously contracted capacity, increasing electricity demand and the increasing unreliability of some existing plants.”

Asked whether peak pricing was damaging to foreign direct investment, the Department of Enterprise said there could be advantages from lower tariffs at non-peak times. “Large energy users, including multinational enterprises, could benefit from lower tariffs, particularly if they shift their electricity usage to times when demand is lower.”

Cloud Infrastructure Ireland, the lobby group for data centres, said the issues were well known. “Data centre operators are committed to working with the system operator and all other stakeholders to help resolve the ongoing challenges and to deliver a sustainable path forward for all,” said Michael McCarthy, the group’s director.