Tackling Ireland's energy crisis

The response to the protests – €750m in fuel tax cuts and rebates announced in March and April – will also effectively expire over the summer, meaning that debate on their replacements is going to rev up sooner rather than later. The government will note that any handclap of appreciation for its measures – described by Taoiseach Micheál Martin as the most generous in Europe – was drowned out by a chorus of criticism.

Caving in?

Some argued that the government was out of touch with a country in crisis, while others were critical it had caved in to voices shouting the loudest. The Economic and Social Research Institute (ESRI) appears to side with the latter, criticising the excise duty cuts in March as a ‘subsidy to higher income households’. The Irish Congress of Trade Unions was equally unimpressed; general secretary Owen Reidy said in April that ‘blockades and barricades have been rewarded with a €500m package of tax breaks’.

For the farming community, however, support measures are focused on business and sectoral survival. Irish Farmers’ Association president Francie Gorman has argued that ‘farmers sit at the end of the value chain and cannot pass on the massive increases in energy and fertiliser prices’.

Windfall expectations

Where there is broad consensus is that the loosening of purse strings to fund the fuel excise cuts was made possible by Ireland’s ongoing multinational tax windfall. An Exchequer surplus of €9bn is predicted this year, providing further leeway and feeding expectations for sizable cost-of-living measures in the 2027 Budget, due in October.

A government approach that buys its way out of problems rather than fixes them will not win friends among policymakers. The Irish Fiscal Advisory Council (IFAC) has already argued that the Budget should not see the support measures extended in their current form.

IFAC chair Seamus Coffey says any subsidies should resolutely target the poorest households. Speaking on Newstalk, he said moves to alleviate price spikes in fossil fuel represent ‘a contradictory approach’, given the country’s legally binding, if flailing, commitments to renewable energy as set out in the 2030 Climate Action Plan.

Concern and pragmatism

The immediate consumer response to fuel price spikes has been a mixture of concern and pragmatism. In April, Ireland’s Consumer Sentiment Index found 88% of consumers saying they will need to cut spending elsewhere if energy prices remain high.

In the same month, the Central Statistics Office (CSO) reported a 73% increase in the number of new EVs licensed, compared with April last year, while the Sustainable Energy Authority of Ireland saw a doubling of grant applications for Irish households for photovoltaic solar panels over a similar timeframe.

A combination of hedging and the global deployment of strategic oil reserves means the immediate price hit has actually been softer than it might have been. Professor Brian Ó Gallachóir, associate vice-president of sustainability at University College Cork, says the full impact of the crisis has been mitigated by the ‘momentous’ decision of the International Energy Agency to release 400 million barrels of oil, ‘the largest amount of strategic oil reserves that have ever been released’. These reserves are finite and Rabobank warned in May that shortages are inevitable for Europe in oil and kerosene if the blockade of the Strait of Hormuz lasts much longer.

Ireland’s overstretched energy capacity and slow pace of renewals adoption makes it particularly exposed. Fossil fuels supply over 81% of our energy needs, well above the EU average, and the ESRI says high electricity prices here can be linked directly to reliance on gas imports.

An autumn energy crunch could have consequences far beyond frustrated consumers. Data centres may not be everyone’s favourite use of energy right now but they are recognised by IDA Ireland as central to anchoring key multinationals here in the age of AI. The Business Post says ‘creaking infrastructure and a strained electricity grid’ mean ‘some €10bn of investment has been lost to the country’ already. This year’s events will hardly allay decisionmaker concerns.

Logjams and workarounds

It isn’t all bad news. Key work was recently completed on the Celtic Interconnector, a powerful electrical interconnection between Ireland and France that is expected to increase supply dramatically from 2028, albeit by outsourcing the solution through undersea cables in a highly uncertain geopolitical era.

Last year, the CSO reported that 40.2% of Ireland’s electricity grid is now fed from renewable energy, with 55.6% of this from wind. Planning logjams continue to delay further progress, however, as ‘over a dozen wind farm projects are now waiting more than a year for a planning decision’, according to RTE.

A planning battle for the ages would certainly be expected if the taoiseach’s recent suggestion, that the country consider nuclear power, is more than just a kite-flying exercise. Former Fine Gael politician John Deasy says the scale of objections to far more modest proposals makes it an obvious nonstarter. ‘Governing decisively has become a mug’s game, and there’s less stress in just handing money out,’ he says.

It may be added that not everyone believes a crisis of epochal proportions is on the way. American investment analyst Ken Fisher argues that a range of ‘Gulf workarounds’ are evolving fast. ‘Talk of shortages arriving in the coming weeks doesn’t just assume the Strait won’t open, it hinges on no new supply sources arriving, he says,  an analysis he describes as ‘doubtful’.

Yet both the crisis in the Middle East and the fuel protests that followed have demonstrated Ireland’s clear vulnerability to sharp, unexpected shocks, both external and internal. Hosting the EU Presidency between June and December will ensure that the spotlight on government decisions is even more intense.