The regulator for the ESB and Eirgrid, the semi-state companies which own and operate the State’s electricity grid, has granted the companies permission for an investment programme totalling €2.8 billion over five years.

The companies had asked for more but the Commission for Energy Regulation (CER) trimmed the requested capital allowance by €300 million and the requested operational allowance by €190 million.

The expenditure allowance, which covers the period up to 2020, is designed to balance affordable consumer prices with the delivery of essential network infrastructure to the economy.

It will deliver a rate of return for electricity distribution and transmission network businesses of just under 5 per cent.

The ESB welcomed the CER’s decision.

The ESB and Eirgrid require spending increase partly because of the rise in the use of renewable energy sources.

As the price of renewable energy equipment falls and the cost of energy supplied by power companies, such as the ESB, rises, the business model of the traditional energy utilities is breaking down.

Minister for Energy Alex White believes Ireland is still on course to meet its 2020 renewable energy targets, which commit the State to sourcing 40 per cent of its electricity from renewable sources.

Concerns had been raised that rising energy demand, linked to economic recovery, would see the State undershoot its targets.