The Government should wean the renewable energy sector off State supports, says the National Competitiveness Council (NCC), and it warned against promoting over-investment in new electricity generation capacity.

In a report to be published on Wednesday, Ireland's Competitiveness Challenge 2014, the State's competitiveness watchdog says price subsidies for onshore windfarms should be scrapped in 2017 as it is a "mature technology".

“It is critically important... that renewable generation capacity is subject to market forces to the greatest extent possible,” it said.

The NCC, whose members include the heads of Google and Paypal in Ireland as well as several other employer and trade union representatives, said the focus of the electricity market should be on delivering new electricity for the cheapest possible cost.

Reducing demand

It called for a focus on reducing demand through, for example, making buildings more energy efficient. It also said Ireland should undertake a cost-benefit analysis of energy policy options before it commits to 2030 emissions targets.

The NCC warned that “Ireland has already begun to slip in terms of our cost competitiveness... with a series of upward cost pressures emerging” that need to be addressed.

The report identified a range of actions the State should undertake to ensure that competitiveness gains made in recent years are not surrendered.

Under the heading “the cost of doing business”, it identified energy costs as one of three critical areas that needs policy action. The heading also included labour costs, where it advised that demands for wage inflation could be partially offset by reforming PRSI for low-paid workers.

To combat increasing property costs, it proposed a site-value tax to replace commercial rates, as well as a range of actions to support the long-term development of the property sector, such as the measures contained in the Construction 2020 report.

The council also advised the Government to publish the advice of the Attorney General that led ministers to abandon plans to tackle the issue of upward-only rent reviews in the commercial property sector.

Widen the tax base

The report also spoke of the need to widen the tax base further and also suggested the Government should reverse some of the cuts to capital expenditure and public investment that were implemented in recent years to balance State finances.

The report called for a renewed focus on skill-based training for jobseekers: “A number of skills deficits persist despite the large numbers of unemployed workers.”

"The hard won competitiveness gains that we have made since 2008 are in danger of being eroded as the economy returns to growth," said Don Thornhill, the NCC chairman. "These gains cannot be allowed to dissipate through either overconfidence or inertia."