Sobre Edipo, el incesto y el reproche femenino.

Ireland’s performance across the key pillars of energy policy, namely cost competitiveness, security of supply and environmental sustainability, remains poor relative to competitor countries.

A2.1 Cost Competitiveness: Electricity

Energy cost competitiveness has been deteriorating for a sustained period - Irish prices increased by 70 percent between June 2000 and June 2007, which is more than twice the average rate of

increase across the EU-15 (32.4 percent)64_.

Industrial electricity prices increased significantly in most EU countries between the second half of 2007 and the second half of 2008, reflecting the substantial increases in international gas, oil and coal prices in summer 2008. In the second half of 2008, Irish industrial electricity costs are the fourth highest in the EU-27, this represents a slight improvement on the second half of 2007, when Ireland was ranked second most expensive (Figure A.1). However prices in Ireland remain out of line with competitor countries - they are 37.8 percent above the EU-27 average and 35.5 percent above the Euroarea average.

Figure A.1: Industrial Electricity Prices (Euro cent/kWh, excluding VAT but including all other

taxes), H2 2007 versus H2 200865

Source: Eurostat

64 Due to changes in Eurostat’s methodology, it is not possible to compare energy prices for 2008 with earlier years.

65 Industrial electricity prices are based on an annual consumption of 2,000MWh – 20,000 MWh, which is the most relevant band for the enterprise base. Data for Luxembourg was not available.

High electricity prices in Ireland are driven by a number of factors, including our reliance on imported fossil fuels — particularly gas, as well as limited interconnection, the small size of the market, the low population density and a legacy of underinvestment in the grid network during the 1980s and 1990s.

It is also useful to understand the component parts of retail electricity prices. Fuel makes up the largest component of retail prices in Ireland, accounting for 56 percent of the average price (Figure A.2). This will be higher for heavy users and lower for lighter users, such as domestic users. For large industry customers, the fuel is estimated to be 70-80 percent of the final price. Networks (transport of power) are the next biggest element, making up almost a quarter of the average retail cost. The other components are the costs of generation (e.g. labour, plant maintenance) and supply (metre reading, billing etc).

Figure A.2: Components of Average Retail Electricity Prices, 2008

A2.2 Cost Competitiveness: Gas Market

UK gas prices have increased significantly relative to other European countries since 2000 – this is a particularly important trend as Ireland imports over 90 percent of its gas through the UK and the Irish price is effectively set by the UK price.

Industrial gas prices increased significantly in most EU countries between the second half of 2007 and the second half of 2008, reflecting the substantial increases in international gas prices in summer 2008. Industrial gas prices in Ireland were the tenth highest of the EU-27 in H2 2008 compared to third highest in H2 2007. As a result, Irish gas prices are at the EU-27 average and slightly below the Euroarea average in the second half of 2008 (Figure A.3).

Figure A.3:Industrial Gas Prices (excluding VAT, including other taxes) €/GJ, June 200866

Source: Eurostat

66 Industrial gas prices are based on an annual consumption of 10,000 GJ – 100,000 GJ, which is the most relevant band for the enterprise base. No data was available for Austria, Cyprus, Greece and Malta.

A2.3 Competition

Competition in the

electricity market in Ireland has been limited compared to the benchmark countries (Figure A.4).

However, the electricity generation market in Ireland has become less concentrated in recent years, particularly since the introduction of the SEM in November 2007.

In 2007, ESB accounted for 49 percent of the all island electricity generation

market67_{. ESB’s share of the generation market will be further reduced (to approximately 42}

percent of installed SEM capacity) following Endesa’s purchase of just over a 1,000MW of divested ESB generation capacity68_.

Similarly, in the electricity supply market, the top supplier in Ireland accounted for 51 percent of the market in 2006. The entry of Bord Gáis and Airtricity earlier this year to the domestic

electricity market (they are already in the business market) is a positive development and should lead to greater competition in the electricity supply market.

A2.4 Security of Supply

Security of energy supply is critical to supporting enterprise development. An unreliable electricity supply can result in additional costs for business, through reduced output or through investment in back-up sources. As more than half of Ireland’s electricity is generated from gas, security of gas supply is particularly important.

67 ESB’s share Includes Coolkeeragh generation plant in Northern Ireland which is operated by ESB International. The all-island generation capacity includes wind farms, the Moyle Interconnector and conventional plant.

68 For further detail see Single Electricity Market, Market Monitoring Unit, Public Report, April 2009. Note that in this paper, the portfolio of Endesa plants, recently acquired from ESB Power Generation, is allotted to the ESB PG portfolio because these plants were owned by ESB PG during the study period. CER press release re-Endesa purchase of ESB plants: http://www.cer.ie/en/information-centre-

newsroom.aspx?article=c25a1f5a-0f5e-4be3-a47f-d968145284e8&mode=author

Figure A.4: Market Concentration in Generation, Share of Largest Three Generators, 2006 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Fi n lan d M a s s ., U S A Ge rm a n y UK S pai n It a ly Ne th e rla n d s De n m a rk P o rt u gal Ir el an d S E M 2007 S in gapor e N e w Zeal an d Fr a n c e

Second and Third Largest Share of Largest

Ireland remains highly dependent on fossil fuels for electricity generation (Figure A.5)69_{. Diversifying}

the electricity generation fuel mix, and in particular reducing Ireland’s reliance on imported fossil fuels, is critical for security of supply. While continued progress on meeting our ambitious renewables targets is vital, we will remain relatively dependent on imported fossil fuels for the

foreseeable future. Ireland has been making good progress with regard to the share of renewable in

electricity generation (including hydro), which has increased from 2.4 percent in 2003 to 12 percent in 2008.

69 There are differing estimates of renewables’ share of electricity generation in Ireland. For this benchmarking analysis, IEA data is used to ensure consistency across comparator countries.

Figure A.5: Electricity Generation Fuel Mix, 2006

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% D enm ar k Sp a in Ge rm a n y N e w Z eal and N e ther la n d s P o rt ug al Ir el and ( 2007) Ita ly F inl and UK S ing apor e Fr a n c e

Renewables Hydro Coal Oil Gas Nuclear

Since the mid 1990s import dependency has grown significantly in Ireland due to an increase in energy use, a decline in indigenous natural gas production and a decrease in peat

production (Figure 6). Ireland’s overall import dependency reached 91 percent in 2006 but decreased slightly to 89 percent in 2007. Indigenous gas resources at Corrib coupled with increasing renewable energy should help reduce our reliance on imports over the coming years.

The level of spare capacity in electricity generation has been a particular concern in Ireland in recent years. However, the combination of falling demand and increased new generation capacity means that Ireland’s position has improved considerably in recent months and the outlook for the medium term is positive70_.

Many other European countries have significant interconnection to other markets, notably Denmark and Finland which are part a regional electricity market, the Nordic pool. Currently, Ireland’s interconnection is limited, accounting for only 6.4 percent of total installed capacity. The delivery of the East-West interconnector to the UK and the second North-South interconnector will

significantly improve Ireland’s interconnection in the medium term.

70 Eirgrid, Update on the Generation Adequacy Report 2009-2015, July 2009.

Figure A.6: Import Dependency: Ireland and the EU-15, 2007

30% 40% 50% 60% 70% 80% 90% 100% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Ireland EU-15 Im por t D e pe nda nc y

A2.5 Environmental Sustainability

A sustained period of energy demand growth and a reliance on fossil fuel accounts for Ireland’s poor environmental

performance. Emissions from the transport sector have been increasing rapidly since 1990 and accounted for 21 percent of total emissions in 2007 (Figure A.7). In 2007, industry’s share was 18 percent, energy’s was 22 percent and the residential sector’s was 10 percent.

Based on revised EPA/ESRI figures from early 2009, the overshoot of the Kyoto target looks likely to be in the region of 1.5m tonnes due to the exceptional nature of the current economic crisis – this means Ireland will not have to spend approximately €300 million set aside over the years 2008-2012 to buy emissions allowances. Nonetheless, policymakers must focus on the 2020 targets set by the EU which state that Ireland’s emissions in the ETS sector must fall by 21 per cent and by 20 per cent in the non-ETS sector (both based on their 2005 levels). This is based on an EU-wide package to reduce total EU greenhouse gas emissions by 14 percent compared to 2005 levels.

Figure A.7: Greenhouse Gas Emissions (M/tCO2e), 1990-2007

Energy Industries Residential Industry & Commercial

Agriculture Transport Waste 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 1990 1992 1994 1996 1998 2000 2002 2004 2006

Appendix 3: Providing Adequate Regional Capacity