Electricity companies must charge users more for energy use during peak evening times due to the “significant risks” to the State’s supply, the regulator has said.
Consumers will pay more for electricity used between 5pm and 7pm each day, which the Commission for Regulation of Utilities (CRU) anticipates will lead to a “reduction in demand at the critical peak period”.
The proposal comes in a consultation paper published by the CRU on changes to electricity network tariffs that will apply for 12 months from October 1st.
If demand for electricity during peak times is not reduced, it could result in power cuts due to supply issues, the CRU said.
The proposed changes will add €26 to an average annual bill for a domestic customer if the level of demand reduction is as forecast, the consultation document states.
However, the body said this increase is €17 lower than would be the case without these proposed changes.
The CRU is holding a two-week consultation period on the issue but said it must “act quickly” to ensure adequate supply this winter.
“While it is unusual to implement changes to the structure of network tariffs in such a short time frame, the CRU considers that it is necessary to act quickly due to the electricity security of supply issues facing Ireland,” it said.
“While the proposed changes will still mean a cost increase, there will be a lower increase for domestic customers, and a higher increase for the sectors which are driving the most need for higher expenditure on security of supply,” a public impact statement in the document said.
Pressure on Ireland’s electricity supply has been under pressure in recent weeks, with Eirgrid, the national grid operator, issuing two “system alerts”, meaning there was enough electricity to meet the demand, but possibly not enough in reserve should something go wrong.
In a submission made to the CRU on the proposals, Eirgrid said it was “concerned” that due to the compressed timelines, there has been no opportunity to carry out the “requisite appropriate analysis” to support or underpin any changes to the current tariff arrangements.
Eirgrid said it supported measures to increase energy security, but the lack of analysis on the proposals means it is not possible to identify or mitigate “unintended consequences” or ascertain if what is proposed would have the desired effect.
“The absence of sufficient time to implement the proposed tariff changes will be hugely problematic for EirGrid, suppliers and all parties impacted by the proposed tariff changes,” it added.
In light of these concerns, Eirgrid said it “does not fully support” the CRU’s proposals.
Consumers have already experienced significant cost increases to their electricity and gas bills, with most suppliers hiking prices multiple times over the past year.
According to the Central Statistics Office’s Consumer Price Index for July 2022, the cost of electricity is up 40 per cent in the past year, while gas is up 56.6 per cent.
However, the CRU insists that “extra-large energy users”, such as data centres, will face a higher increase to their bills under the proposals.
The CRU said the risk to the security of the State’s energy supply is a result of “the closure of large electricity generation units, the failure of new contracted generation to deliver, an accelerated degradation of the existing fleet as it responds to intermittent wind generation, and significant demand growth across a number of sectors of the economy”.
Electricity demand in the State is expected to increase by 13 per cent between 2021 and 2025, but 62 per cent of this is set to come from “extra-large energy users”, with the CRU specifically citing data centres as contributors to the rapid increase in usage.
This rise in demand will place “significant strain” on Ireland’s decarbonisation goals and security of supply, the CRU said, adding there is an expected capacity shortfall in coming years, with “particular challenges” expected over the next two winters.