Ireland has one of the highest rates of dependence on imported energy sources in Europe, although dependence has declined in recent years.
This is according to a report on energy security by the National Council for Competitiveness and Productivity, which calls for an urgent focus on projects aimed at diversifying the sources of energy supply as well as investing in the modernization of the country’s electricity infrastructure.
The report notes that Ireland’s dependence on imports for energy supply stood at just over 70% in 2020, which was the eighth highest in the EU and well above the EU average of 57%.
However, the rate is down from an average of 89% between 2001 and 2015, with the Corrib gas field contributing to domestic energy production as well as the contribution from renewable energy sources.
“This heavy reliance on imports means that Ireland is more exposed to external shocks in energy markets, such as the current crisis in Ukraine which has accelerated energy price inflation, natural gas prices and of oil reaching near-record levels,” the report concludes.
It is widely recognized that security of energy supply is crucial to maintaining the country’s attractiveness as a destination for business investment, as well as an important factor in maintaining adequate living conditions.
However, recent increases in energy prices have highlighted the sector’s vulnerability to price shocks that are beyond the control of industry and consumers.
“The current challenges facing the Irish energy system have potentially significant implications for Ireland’s operating environment, particularly for energy-intensive businesses, and Ireland’s international reputation as a as a place of foreign direct investment,” the report notes.
Given the expected increase in electricity demand in the coming decades, the Council concludes that a major investment is necessary to improve the electricity network.
This, he says, will be driven by the electrification of many sectors, including heating and transport, as well as demand from large industries and data centers.
“These improvements must be made in a well-planned and cost-effective manner to avoid unduly increasing the cost base of Irish businesses, particularly for energy-intensive businesses, thereby eroding Ireland’s competitiveness,” he warns.
“Energy bills are a largely inflexible component of a company’s cost base, and they are a key driver of cost competitiveness in certain energy-intensive manufacturing sectors.”
“The current crisis in Ukraine has accelerated energy price inflation, with natural gas and oil prices reaching near record highs. As a small open economy, Ireland is highly exposed to these cost increases and energy supply challenges,” said Frances Ruane, President. of the National Council for Competitiveness and Productivity.
“But we must not lose sight of the need to invest in strengthening Ireland’s energy security in the medium to long term, focusing on projects to diversify sources of energy supply and investing in modernization of our electricity infrastructure in a way that aligns with achieving the goals in our climate action plan,” she added.