“Persistent deficits” in energy and water now represent a serious “reputational risk for Ireland”, the National Competitiveness and Productivity Council (NCPC) has warned.
In its annual “competitiveness challenge” report, the agency said the current strain on infrastructure meant demand from enterprise would soon outstrip supply “with ramifications for SMEs and the investment decisions of internationally mobile foreign-owned firms”.
The State’s challenges were being compounded by a rapidly growing population, it said, noting the latest population projections indicate the population could potentially expand by one million by 2040.
The council called for a more co-ordinated approach to infrastructure at State level. Its comments come amid calls from business leaders, which appear to have the backing of Taoiseach Simon Harris, for a dedicated minister for infrastructure.
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In its report, the council highlighted the strain on the State’s energy grid, noting that while grid operator EirGrid’s forced outage statistics improved slightly in 2022, “this was still the second worst year on record”.
The forced outrage rate is the proportion of time that a generation unit is expected to be unavailable for electricity production.
The NCPC also warned that while EirGrid states there is no risk of a system-wide “blackout” due to insufficient generation, the assessment assumes that there will be uninterrupted reserves of natural gas, from both the Moffat terminal and the Corrib gas field.
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But the council warned the gas network itself was subject to considerable volatility.
“Infrastructural deficits act as a drag on competitiveness, and Ireland must make progress in order to keep pace with international competitors,” it said.
The council’s report comes in the wake of figures from the Central Statistics Office indicating that electricity consumption by data centres represented over a fifth of total demand last year, eclipsing the amount used by urban households for the first time.
The NCPC noted that a new set of water and wastewater charges for firms was due to come into effect in October 2024, further adding “to the enterprise cost base” and that there were now 188,625 non-domestic water users in the State.
On housing and construction, the council noted “the importance of ensuring that we strike the optimal balance between types of construction sector activity and output (for instance, residential versus commercial)”.
It contrasted the relatively high level of vacancy in the commercial property sector since Covid with the continued undersupply in the residential sector.
In its report, the council made a number of recommendations under several headings: embracing technological change; harnessing the potential of the European Single Market; building and retaining a skilled labour force; tackling obstacles to the planning and delivery of infrastructure; and the cost of doing business.
The acceleration in costs faced by businesses operating in Ireland had triggered an increased level of insolvency, it said. The report cited the latest iteration of the PwC insolvency barometer, showing there were 416 insolvencies in the first half of 2024, a year-on-year increase of 25 per cent.
“Addressing these infrastructural challenges will require Government to engage in strategic prioritisation and sequencing of capital projects, and increased efficiency and timeliness of delivery, particularly in the context of an economy that is operating at capacity,” NCPC chairwoman Frances Ruane said.
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