Earlier estimates about the demand for electricity have been revised upward based on stronger prospects for the economy, the national grid company revealed yesterday.

In its Forecast Statement 2004 to 2010, ESB National Grid, run by chief executive Mr Kieran O'Brien, said average peak demand for power would increase by about 3.8 per cent annually during this period. An earlier estimate put peak demand growth at 3.2 per cent.

"The higher growth reflects a more optimistic economic outlook, particularly for the later years of the decade," the grid company said.

It used economic forecasts from the Economic and Social Research Institute to calculate the electricity demand. There is a direct link between economic growth and electricity demand, according to most experts.

By the end of this decade, the demand for electricity will reach a record of 5,517 megawatts, the forecast discloses.

If this forecast becomes reality, extra generation will be needed, although ESB National Grid says it hopes about 6,611 megawatts of power will be available by the end of the decade. Most will come from conventional power stations, but wind and combined heat and power plants will also play a part.

ESB National Grid, which is ringfenced from the ESB group, is responsible for the electricity transmission system. It operates from the same offices as ESB, but is a separate unit with its own management structure.

The forecast identifies the area from north Cork into Limerick as the best location for a new power station, but it emphasises that Dublin is still able to meet new customer demand.

Meanwhile, Sustainable Energy Ireland claimed yesterday that businesses in the Republic were facing a "tide" of increasing energy costs. It said electricity prices were 17 per cent higher than the EU average, and gas prices were also too high.

The organisation said energy efficiency was the best way to mitigate the recent increases.

"By examining ways in which energy efficiency can actually improve the bottom line, executives will transform the issue of energy efficiency from a cost burden into a sustainable competitive advantage," according to Mr Andrew Parish, of Sustainable Energy Ireland, a statutory authority charged with promoting sustainable energy.