Ireland has among the highest rates of dependency on imported sources of energy in Europe, although dependency has declined in recent years.
This is according to a report on energy security from the National Competitiveness and Productivity Council.
The Council has called for an urgent focus on projects to help diversify energy supply sources, as well as investing in upgrading the country’s electricity infrastructure.
The report noted that Ireland’s import dependency in the area of energy provision stood at just above 70% in 2020, which was the eighth highest in the EU and well above the EU average of 57%.
However, the rate is down from an average of 89% between 2001 and 2015, with the Corrib gas field contributing to domestic energy output, as well as the contribution from renewable energy sources.
“This high import dependency means Ireland is more exposed to external shocks to energy markets, such as the current crisis in Ukraine, which has accelerated energy price inflation, with natural gas and oil prices rising to near record levels,” the report concluded.
It is widely acknowledged that security of energy supply is crucial to maintaining the country’s attractiveness as a destination for enterprise investment as well as being an important factor in maintaining adequate living conditions.
However, recent energy price increases have put the spotlight on the vulnerability of the sector to price shocks that are outside of the control of industry and consumers.
“Current challenges faced by Ireland’s energy system have potentially significant implications for Ireland’s operating environment, particularly for energy intensive businesses, and Ireland’s international reputation as a location for Foreign Direct Investment,” the report noted.
Given the expected increase in electricity demand in the decades ahead, the Council concludes that major investment is required to improve the electricity grid.
This, it said, will be driven by the electrification of many sectors, including heat and transport, as well as from large industry and data centre demand.
“These improvements must be done in a well-planned and cost-effective manner to avoid unduly increasing the cost base of Irish enterprise, particularly for those enterprises which are energy intensive, thereby eroding Ireland’s competitiveness,” it warns.
“Energy bills are a largely inflexible component of a business’s cost base, and they are a key driver of cost-competitiveness in certain energy intensive manufacturing sectors.”
“The current crisis in Ukraine has accelerated energy price inflation, with natural gas and oil prices rising to near record levels. As a small open economy, Ireland is acutely exposed to these cost increases and to energy supply challenges,” Dr Frances Ruane, Chair of the National Competitiveness and Productivity Council, said.
“But we must not lose sight of the need for investment to bolster Ireland’s energy security in the medium to long term, by focusing on projects to help diversify energy supply sources and by investing in upgrading our electricity infrastructure in ways that align with meeting the targets set in our Climate Action Plan,” she added.