4 days ago
How high might electricity prices rise to again?
Irish consumers are used to paying more than their European counterparts for electricity.
Recent figures from Eurostat show prices here are the third highest across the European Union - almost 30% more than the average for the 27 member states.
This means Irish households are paying roughly €350 more per year for their electricity, with the average annual bill here coming in at around €1,800.
There are a few notable reasons for this.
In comparison with other EU countries, Ireland has a relatively dispersed population with a lot of one-off housing.
This makes the cost of maintaining the grid comparatively higher on a per capita basis.
While demand - notably from data centres - has grown substantially in recent years, putting increasing pressure on supply.
And when demand does peak, importing low-cost electricity from abroad isn't straightforward, given we're on an island with a lack of interconnectivity.
Add into the mix volatility in the supply and cost of energy brought about by wars in Ukraine and the Middle East, and Ireland's complicated path to lower-cost electricity is apparent.
As a result, both ESB Networks and Eirgrid - the operators of the country's energy system - have spent huge sums on much-need grid improvements in recent years.
But all of this comes at a significant cost, which is largely passed on to customers.
Network tariffs or grid fees, make up almost a third of an electricity bill - so that is well over €500 yearly based on the average bill.
€19 billion network investment would add up to €16 onto bills
ESB Networks and Eirgrid are now proposing an investment of nearly €19 billion over the next five years (2026-2030) to maintain and upgrade their networks to meet current and future demand.
Such an investment, if approved by the Commission for Regulation of Utilities (CRU), would add up to €16 to customers' electricity bills each year.
ESB Networks outlined the acute need for such an investment this week at the Oireachtas Housing Committee.
Nicholas Tarrant, CEO of ESB Networks, said the demand for electricity for new homes was twice what it was for houses built during the Celtic Tiger due to the installation of heat pumps and the use of electric vehicles.
He said the organisation is seeing "a major increase in demands for connections to the network".
However, the CRU (which approves network investment plans) is instead proposing an initial €14.1 billion grid investment between 2026 and 2030 that would see at least €6 added annually to bills.
This figure could be increased to €18.08 billion based on ESB Networks and Eirgrid meeting annual delivery targets - which would see the €16 yearly increase come into play.
A final decision will be made on this proposal later in the year, but one thing is for sure, household bills will rise.
Commissioner at the CRU Fergal Mulligan said the cost to the consumer "will be assessed on a year-by-year basis" and that the level of increase will "depend on a number of factors, including the level of delivery by the network operators and how suppliers choose to recover network costs".
The electricity suppliers can individually determine what level of these charges they either absorb or pass onto their customers.
Daragh Cassidy from comparison site is hopeful households mightn't have to bear the full cost of this, pointing out that "if the wholesale cost of electricity, which makes up around half of the price we pay for our electricity, were to fall substantially this might cancel out any increase in grid fees over the coming months and years".
Further network charges to come into effect later this year
However, even if the amount added to bills from future grid investments (from 2026) is relatively low, later this year customers will still be hit by network charges from the current round of approved investment in the network (covering 2012-2025) - and they are expected to be rather substantial.
Last year the CRU approved an increase of just over €100 in network charges on customers' bills annually.
This year's grid-fee increase - to be determined in the coming months - isn't expected to be that high but will still add more financial pain to energy customers.
Cutting back outgoings by avoiding these fees simply isn't an option, homes need electricity, so customers will need to be even more price-conscious to keep costs down.
The CRU is encouraging customers to shop around and switch suppliers regularly to get the best deals and minimise the impact of any increase in charges.
That's simple but effective advice. If you've been with the same energy provider - electricity and/or gas - for more than a year, the chances are you're paying more than you need to.
Suppliers offer new customers the best rates, and it's important to accept this and be prepared to make the switch every year when you're contract is up.
And this is a lot easier than many might think. "Everything can be done online in the space of a few minutes, you don't even need to contact your existing provider," Mr Cassidy said.
The reality is we have a growing population, we're transitioning towards net-zero, and trying to build more resilience into energy systems.
All of this needs to be paid for somehow, so incremental electricity bill rises (aside from those related directly to electricity prices) can be expected as we go further down this path.
