The Internal EU Electricity Market: Implications for Ireland

26 October 2011

The Internal EU Electricity Market: Implications for Ireland

Single EU Electricity Market Promises Benefits to Ireland The creation of a single EU wide electricity market offers significant benefits for Ireland:

• Ireland has high electricity prices by EU standards. The single EU electricity market should result in lower electricity prices.
• Competition will be keener as suppliers from Great Britain and beyond will be able to enter the Irish market. This should spur efficiency and increase consumer choice.
• Security of supply will increase through access to a greater diversity of fuels – hydro power from Northern Europe and nuclear power from Great Britain and France.
• There will be less need for maintaining expensive reserve capacity to insure against supply interruption.

However, this assumes:

• No major policy failure in UK energy policy that results in an unanticipated increase in electricity prices that cannot be offset by increasing interconnection between Great Britain and continental Europe. Such a failure might, for example, be Great Britain’s inability to replace a quarter of its generation capacity by 2020.
• Implementation of the EU legislation creating the single EU electricity market in Ireland will be sufficient flexibility to avoid potentially costly changes to the all-island electricity market arrangements. The deadline for Ireland has been extended to 2016 from 2014, the latter date applies to all other Member States.
• Interconnectors will not be built primarily to export renewable electricity above that required to achieve the 40 per cent renewable target. Current renewable electricity generation support feeds through to higher electricity prices. Further reinforcements of the transmission system to accommodate additional exports would also increase electricity prices.

Note to Editors: 1.The European Union is creating a single electricity market. The legal architecture, the Third Directive, has been enacted. Important implementation decisions still need to be completed. An EU-wide deadline of 2014 has been set. However, Ireland has been granted transitional arrangements until 2016. One interconnector (Moyle IC) has already been built and another (East West IC) will come on stream in Q3 2012, both between Ireland and Great Britain. On completion the scope of the internal market is likely to include wind power from the North Seas and solar power from North Africa. The 40 per cent renewable target states that by 2020 40 per cent of electricity demand is derived from renewable sources, almost exclusively wind. 2. The Internal EU Electricity Market: Implications for Ireland, by Paul Gorecki (ESRI), will be published online on the ESRI website at www.esri.ie at 00:01 a.m. Wednesday 26 October. The embargo is until 00:01am Wednesday 26 October.

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