The decisions by Electric Ireland and Bord Gáis Energy to reduce prices to consumers is welcome and gives some reassurance about the state of competition in the energy market. It was the second cut by both providers in recent months, and it is encouraging to see the big players competing now in claims that they are providing value. Households need to do their own sums, as the best option often depends on individual circumstances, but bills are starting to fall.
Other provides are likely to follow, and if wholesale prices remain on a downward trend, then another round of reductions is likely later in the year, probably around Autumn. Were some of the players in the market able to up the ante ahead of this, it would be welcome.
The energy market operates in a unique fashion, covered by regulation which tries to encourage competition and particular rules, some of which were called into question during the energy crisis. Calls for reform in market structures in the midst of the crisis led to little enough change, bar a variety of special taxes – including in Ireland – to try to take back excess profits being made in areas of the market. The opaque nature of the market, and the impact of hedging in particular, reduces transparency.
While energy prices are falling, wholesale prices still remain well above the levels which households and businesses became used to for many years. And even if they decline further, this looks likely to continue to be the case. This should speed Government efforts to move to renewables – and should also encourage private investment in this area. But it also creates dilemmas for the Government in terms of energy supports, many of which are now being phased out across the EU.
The Coalition’s decision to announce another round of general household energy supports in the budget last October was questionable and should not be repeated. Future assistance needs to be focused at households who need it, in other words those at lower income levels.
The other key policy area, as well as energy prices and their impact, is energy security. The crisis underlined how Ireland remains exposed due to its reliance on energy imports, particularly from the UK market. Developing more renewable sources – including offshore wind – is a vital step to address this, but familiar delays in the planning system and rising costs are threatening the vital investments needed. Plans to build up electricity interconnection are also vital – a second interconnector with the UK is nearly complete and work is starting on one to France.
The crisis has shown that Ireland is exposed from a supply point of view and has put a focus on the slow progress in the move to renewables. Falling prices to consumers must not lessen the urgency of tackling these issues.