The State's plan to cut carbon dioxide emissions, due to come into force in the New Year, threatens to cause power shortages, the independent energy regulator has warned.
The Commission for Energy Regulation (CER) said the Environmental Protection Agency's (EPA) chosen system could block new electricity generators from starting up in the Republic.
New power stations are vital because the Republic of Ireland may be short of electricity for 300,000 houses by 2007 if current trends continue, the regulator has warned.
From January 1st, the biggest 70 Irish companies, including the ESB and CRH, will have to obey stringent CO2 limits, or else face multi-million euro bills.
The legally-binding regime is part of a European Union-wide effort to cut greenhouse gas pollution before the entry into force of the Kyoto Treaty in 2008.
The EPA's National Allocation Plan (NAP) gave affected Irish companies their permitted limits on September 30th, but the EPA's board will not sign off finally until later this month.
Irish CO2 emissions have increased by 30 per cent since 1990, though industrial production has jumped by 100 per cent and electricity consumption by 48 per cent.
In its final submission to the EPA, the energy regulator said: "The commission considers the proposed treatment of new entrants in Ireland inadequate and poses serious problems. Failure to provide an attractive investment environment for new entrants compared to other jurisdictions may discourage required new conventional generation to locate here. The commission is concerned that this may have serious implications for continued security of supply," said the commission on October 13th.
The energy regulator said it was "critical for system security" and continued electricity supplies that the EPA's plans do not frighten off new generators.
Under the EPA's plan, new energy companies would be able to share free licences to emit one million tonnes of C02 annually - just 1.5 per cent of the total emissions. However, they would have to buy licences to cover any extra emissions at a cost of €10 a tonne - though this price could rise significantly.
The free licences offered by the EPA "appear inadequate to afford equitable treatment to new entrants" compared with existing companies, such as the ESB, the commission warned.
The ESB has received a licence to produce 167,000 tonnes of CO2 annually over the next three years at its Bellacorick plant in Ballina, Co Mayo, though it is due to close in early 2005.
The licence should be shared with new operators once Bellacorick closes, rather than being auctioned off by the Exchequer, the regulator said. One private energy generator, Viridian, said licences should be used to reward new, environmentally-clean plants at the expense of old ones.
Meanwhile, Bord Gais has complained about the limits imposed by the EPA on one of its facilities outside Midleton, Co Cork. The opening of the Seven Heads field in 2003 by Ramco Energy required Bord Gais to bring the station back into service. In its letter to the EPA, Marathon Oil, which operates the gas field, said Midleton is "a vital part" of the gas pipeline.
