Energy - Energy Policy and Economic Recovery 2010 - 2015 - Feb. 28, 2011
The Irish Academy of Engineering has published a report on “Energy Policy and Economic Recovery (2010 – 2015)”.
The unprecedented economic crisis in Ireland has created circumstances that require a rapid and fundamental change in energy policy in order to support economic recovery. A short term (five year) policy perspective is urgently required. For the next five years the overriding priority in the energy sector is to achieve significant cost reductions in order to facilitate competitiveness in the productive, particularly the export, sectors of the economy.
Energy demand has dropped substantially since the 2007 and demand growth is projected to remain low for the next decade mirroring the projected low growth in the Irish economy. Irish power industry is “over-invested” after more than a decade of extraordinarily high capital expenditure as planners appear to have assumed the indefinite continuation of the “bubble” economy. There is, for example, no requirement for additional generating capacity on the Irish power system for at least the next ten years.
Given the constraints on the Irish economy, the priority for short term policy is the minimisation of energy costs and energy sector capital investment. It follows on from the previous Academy reports on energy policy over the last four years, where reservations were expressed regarding Irish energy policy.
The report sets out an alternative strategy for the next five years, based on:
- Reducing capital investment in the energy sector to a minimum necessary level, particularly with respect to wind power generation and associated grid extensions.
- Switching investment to demand side measures, particularly to energy conservation measures.
- Taking advantage of the subdued level of natural gas prices predicted for the next five to ten years.
A switch, from a policy focussed on increased electricity production, to one focussed on reducing energy consumption would:
- Meet Ireland’s carbon abatement obligations at a lower cost than current production focussed policy
- Provide a significant and welcome stimulus to the Irish construction industry
In the context of Ireland’s existing surplus of installed generating capacity, up to 2015 and beyond, a failure to change the existing energy policy will reduce rather than improve Irish competitiveness. The report concludes that the proposed level of wind powered generation will add substantially to generation costs, to the detriment of Ireland’s economic competitiveness in the short term, and result in the destruction of value of existing generation assets owned by the taxpayer when we can least afford such damage. In other words, maximum use should be made of existing generation assets.