On the cusp of a forecast heatwave, it may seem strange to fret about the long hard nights of winter. But that is exactly what is going on amongst those who run the electricity market, as market supervisors grapple with the threat of blackouts when the winter cold prompts surging demand for power. That nightmare prospect is all too real, hence the talk of severe steps to curb industrial consumption. The aim is to avert the risk of breakdown on the national grid and the catastrophic consequences of this for society and the economy.
This is not a new theme. Supply constraints have already led to restrictions on new, power-hungry data-centres. But proposals to introduce “peak tariffs” are further proof that deep-seated problems in the dysfunctional market will take years to resolve. Even on Tuesday, due to slack wind, Eirgrid was warning that supply conditions in the electricity market were tight.
It should never have come to this. At issue is a mismatch between supply and demand. In a growing economy close to full employment, demand is rising sharply. Supply doubts flow from the shortage of back-up gas generation when renewable wind power is unavailable; delays commissioning emergency power stations; the non-delivery of contracted capacity; technical problems on older plant; and the need – for climate reasons – to decommission power stations that burn coal and oil. This is to say nothing of soaring power prices linked to energy costs and the risk of Moscow cutting gas flows to the EU, potentially adding further pressure on prices and creating doubts about supply.
The Commission for Regulation of Utilities plans a consultation on imposing “peak tariffs” when demand is highest, code for dissuasive penalty pricing at levels so elevated that big industrial users would have little choice but to curtail consumption until pressure eases.
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These are drastic steps that do not sit well with Ireland’s image as a global hub for international business. IDA Ireland’s displeasure is clear. The inward investment agency argues for competitive energy pricing “at all times”, quite the opposite to the measures contemplated by the CRU. These involve higher block tariffs to incentivise demand reduction at key times and prospective lower tariffs in non-peak hours. Despite talk of cutting domestic and small business demand, it is big industrial guzzlers such as data centres and manufacturers which would bear the brunt.
In an economy heavily reliant on foreign direct investment, these are risky moves. But the alternative of rolling blackouts would be much the greater evil. Everything possible must be done to avert that, although penalty tariffs should be deployed only as a last resort and for the shortest time possible. Now more than ever, the overriding priority must be to definitively settle energy supply constraints. But that, too, will take time.