ESB should sell several power stations - ESRI

The ESB should sell several of its power stations over the next five years in order to promote competition in the energy sector…

The ESB should sell several of its power stations over the next five years in order to promote competition in the energy sector, the ESRI said yesterday.

A new report from the institute, Aspects of Irish Energy Policy, suggests the ESB should sell between 500 and 1,000 megawatts in the period running up to 2010. This would amount to three to four stations.

The ESRI said the ESB should be allowed replace some of these stations, but others should be provided by its competitors. The organisation said these changes would reduce the ESB's dominant position in the market.

In relation to other parts of the ESB the report states: "Where possible, the ESB distribution and supply divisions should move to buying in services on a competitive basis." It says this approach has been taken by Bord Gáis since the late 1980s.

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It suggests that ownership of the electricity transmission system should pass to ESB National Grid. The system is currently owned by the ESB group.

The report also contains several controversial suggestions, including a carbon tax. The authors suggest that unless such a tax is considered for certain sectors, it is unlikely the Republic will meet its emissions targets. However, it says in the light of recent oil prices, a "sensitive approach" in this area is needed.

The authors also emphasise the importance of getting gas from the Corrib gas field ashore as soon as possible. It says the gas will "enhance the physical security of Irish energy supply".

On the overall position of the ESB, the report is upbeat about reducing the company's dominance. "The operation of the new all-island market structure should prompt a significant closure of old inefficient plant and replacement by new plant, built by different operators. Together with enhanced interconnection to Britain, this should see the ESB's dominant position in the generation sector on this island substantially eroded by early in the next decade".

An ESB spokesman said the findings of the report complimented "the ethos of ESB and its behaviour in the marketplace".

The ESB had facilitated market opening and agreed with the regulator not to build new plants. The company had agreed long-term contracts with two new generation plants at a cost of approximately €1 billion over 10 years.

He said the company had also supported the Government's renewable energy policies. While the ESB was a large player in the Irish market, it was very much a smaller player in the context of the British or European market.

On electricity prices the report predicts a relatively benign future. It does not rule out significant increases, but says certain developments will help slow down the rate of increase.

"An all-island electricity market is likely to confer significant benefits on consumers, reducing the long term cost of providing a reliable electricity supply below what it might otherwise be," states the report.

The report also strongly emphasises the need for fuel diversity. It raises concerns that the Republic may be too dependent on gas. It says a levy on gas used in electricity generation might be considered.

It says Ireland has fewer reasons to worry about interruptions to physical supply and should be more worried about sudden shocks to energy prices.

"Major price shocks could have serious economic consequences and the regulatory authorities need to consider how best to insure against such future shocks."