Plans to get the private sector to build and manage two electricity interconnectors at a cost of €400 million from Ireland to Wales look set to be abandoned after less than five months.
The Minister for Communications and Natural Resources, Mr Dermot Ahern, announced plans to develop the two interconnectors in February.
However private sector compaines are not prepared to accept all the risk involved in such large projects.
This follows the disclosure last week that there have been 19 "amber alerts" impacting on the electricity system so far this year.
An amber alert is regarded as a serious warning that a major power shortage could be on the cards unless immediate action is taken.
One of the Government's responses to the problem of electricity shortages is the idea of an interconnector.
But private companies are relucant to take on too much risk and they favour a "hybrid" model where the State guarantees a certain return from the assets in exchange for private sector funding.
In addition the Commission for Energy Regulation (CER), which invited expressions of interest on behalf of the Minister, has written to Mr Ahern telling him it would be better to just proceed with one interconnector at this stage.
The CER is also understood to have told the Minister there is insufficient interest for a solely private sector solution.
Back in February the Minister announced plans to get the CER to hold a competition to develop what are known as "merchant" interconnectors.
These are interconnectors built, managed and owned solely by the private sector. However the Minister may have to re-open the competition and offer companies what is described as a "regulated" solution.
This would involve a company financing and building an interconnector and getting some level of guaranteed return each year.
An electricity interconnector is essentially a cable on the bottom of the Irish sea.
Each interconnector is capable of providing 500 megawatts of power, larger than even a modern gas fired power station.
If an interconnector with Wales is built, it could then be used by the various electricity suppliers in the Republic, among them ESB, Bord Gais and Energia.
They will all be able to import power from Britain across the interconnector.
Equally under EU legislation British electricity firms will be able to sell power to Irish customers using the interconnector.
Back in February Mr Ahern said there were several benefits to getting an interconnector up and running.
"By providing 1,000 megawatts of additional electricity onto the Irish grid, the interconnectors will provide many benefits, including enhanced security of supply, increased competition in the electriricty market and integrate Ireland into the wider European energy market".
For the whole project to work electricity prices in Britain have to be lower than in the Republic.
At present United Kingdom prices are 10-20 per cent lower than in Ireland.
However sources warn this may not continue and Irish prices could drop.
One source said: "Nobody is prepared to take the risk of building the merchant interconnector with that kind of uncertainty in the background."
Editorial Comment: page 13
