Submission to the Cost of Business Advisory Forum (Energy Costs)

Introduction

The Irish Exporters Association (IEA) is the leading independent representative body and voice for exporters based in Ireland. The organisation represents exporters and supply chain operators across the country and works at regional, national, and European levels, advocating for a regulatory and legislative framework that supports, drives, and fosters Irish exports.

 

On behalf of our members, we extend our gratitude for the opportunity to contribute to the Department of Enterprise Tourism and Employment’s Cost of Business Advisory Forum consultation on Energy Costs and Security of Supply. We commend the government’s long-standing commitment to fostering a vibrant and competitive enterprise environment in Ireland through various programmes such as this.

 

Introduction

This paper, in answering the specific questions posed by the Department, discusses the impact of rising electricity costs on Irish businesses along with the lack of capacity on the National Grid, particularly in the context of international competitiveness, foreign direct investment (FDI), and export markets. While companies have attempted to pass increased costs onto customers, and have looked at ways to manage capacity shortages, this has not always been possible, resulting in a competitive disadvantage, especially when compared to overseas operations in places like the United States.

 

Key relevant policy, decision-making institution, regulatory body or Government Department required.

 

Eirgrid, ESB, An Bord Pleanála, Commission for Regulation of Utilities (CRU), Department of Enterprise, Trade and Employment, Department of the Environment, Climate and Communications

Background

The global exporting landscape is currently marked by unprecedented uncertainty and volatility, driven by geopolitical tensions, trade tariffs, and the ongoing impacts of climate change and digitalisation.

 

Compounding these challenges, the cost of doing business domestically continues to rise. In the face of these external pressures, it is vital that we as a country focus on effectively managing the factors within our own control. Among these, the cost and reliability of energy stands out as a crucial expense for Irish exporters. Rising domestic operational costs, particularly those connected to energy procurement and efficiency, continue to strain competitiveness. By prioritising strategies to reduce cost and enhance energy efficiency and secure more predictable energy supplies,

 

 

 

Specific Questions

 

1. How has the capacity of Ireland’s National Grid impacted your business/sector?

Grid bottlenecks affect high power sectors, in particular the heavier industrialized manufacturing, food and drink, tech and pharma sectors. This affects them in several ways, including price, availability of power, adequacy of requisite Megawattage line and connection to the Grid, all of which hinder investment, job-creation and expansions as well as innovation and some decarbonization efforts.

 

In some cases where the product is less time-sensitive, businesses have agreed to shut down during periods of increased demand and are receiving compensation as a result. But as these shutdowns have become more frequent, the compensation is no longer sufficient to cover the loss in productivity causing the re-scheduling of production at short notice.

 

Demand Side Unit

As a specific example, a member who is part of the Demand Side Unit (DSU) scheme has seen almost a 10-fold increase in requests for demand reductions (DRs) over the past 5 years.  Historically, they may have had less than 5 DRs per year and annually now this is closer to 40 per year. During May 2025, alone they received 2 DSUs in the space of 24 hours, weather was warm and there was no wind.

 

Also of note is that the compensation paid under the DSU has not changed sufficiently to keep apace of both the increase in the price for electricity and the disruption caused by the dramatic increase in DRs. Compounding this is the cost of the workforce, laid idle by these DR’s, as well as any overtime that may need to be paid to get production back up and running to schedule.

 

We foresee members deciding to opt out of the DSU program as it is becoming far too disruptive for the benefit they have been receiving.

 

Other issues

There has been high-profile coverage of how the lack of investment in the Grid is hampering growth and investment in larger businesses in the FDI sector, but many indigenous Irish businesses are now reporting the same problems.  Whilst these businesses may be of a smaller scale, they nonetheless are important employers in regional locations and are a vital part of our business ecosystem. We are aware of a tech manufacturer which has put on hold an expansion due to the lack of requisite capacity on an available connection. They were offered a 10 MW line – a fraction of what was required and this after years of waiting for a connection.

 

Added to our reliance on a relatively narrow existing energy mix, which compares poorly with the likes of a similar country such as New Zealand with its additional Geo-Thermal input, there are specific factors locally for several businesses. For instance, in the Northwest there is no alternative ready supply of energy to electricity, with a lack of available gas lines in the rural Sligo-Leitrim area.

 

2. How has the cost of energy impacted your business/sector?

Members in general are reporting a minimum of a doubling in the price of electricity over the last 5 years, with a particular spike to 5X in 2022, and now running at between 2X – 2.5X.  In companies classified as large energy users, this is putting unbearable strains on them, and any company with low margins selling into competitive international markets are suffering heavily, and in some cases operating with no margin at all.

 

Members note the comparative prices for electricity in other countries where they either have plants of their own or where they have sister plants. The price of electricity in Ireland is being quoted at a minimum of 1.5X the price of other markets, with 3X-5X for different locations in the USA and up to 7X in parts of Canada where there is a good mix of Hydro power. Members mention that whilst the cost of labour in the USA is a deterrent to investing there, the price and availability of energy is the opposite.

 

Breakdown of costs.

Members note a substantial increase in pass-on charges in the last 12 months. One member notes a resulting increase of 11% in their electricity costs and that 45% of their electricity cost is made up of:

 

PSO Levy:                    4% Network Charges:          20% Imperfection Charges:    8%

Capacity Charges:           8% Taxes & other Charges:     4% Renewable Premium:        1%

55% is for energy charges.

 

3. How has the cost of energy impacted expansion or development opportunities for your business/sector?

 

Similar to other cost increases post Covid (2020/21) & with Ukraine (2022), members have seen a general rise in the cost of production, with some quoting up to 40%. But whereas the increased cost of labour has averaged 3% p.a., energy has doubled (at a minimum) over this period.  This becomes particularly acute in companies that are medium to large users of electricity, with large employers in the tech sector noting their energy costs are greater than their labour bill.

 

Companies have tried to pass on as much of this price hike into the markets as they can. However, they note that this is not always or fully possible, and that they are being increasingly put at an unnecessary competitive advantage in their various export markets.

 

Furthermore, members with overseas operations in the U.S. note that whilst labour costs are comparatively much higher there, we are at a competitive disadvantage when it comes to energy costs. Whilst the threat to attracting FDI expansions into Ireland is well noted, Irish owned companies are increasingly aware of this price difference, and with the tariff situation in the USA, a number may actively consider whether Ireland is the best place for them to expand in order to continue to supply that market competitively.

 

4. What steps has your business/sector taken to mitigate high energy costs (i.e., any specific strategies)?

 

Members are closely monitoring price and usage. Some engage with consultants for market advice and others have established working groups internally, or created particular roles focused on energy (saving) leadership. These are focused on reducing energy usage and on bringing momentum to defining energy saving projects and driving savings within the business.

Some are actively moving between the wholesale market and fixed contracts, switching to fixed pricing in times of uncertainty. Some have invested in a site solar project and others are investigating a scheme to bring generators onsite to replace the DSU and offer stability at peak time on the grid.

 

5. What are your views on efficacy of State supports.

Existing and recent supports such as TBESS, Efficiency Grants, the Ukraine Enterprise Crisis Scheme and Power Up grants are largely short-term fixes in nature.

 

Another approach to funding the 45% of non-energy charges needs to be found. We strongly urge a mix of funding from the Strategic Investment Funds, coupled with Public-Private initiatives, backed by advanced procurement mechanisms, and more stringent public procurement contract pricing rules.

 

Removing these from the bills our members face, would virtually reduce energy costs by 50% increasing our competitiveness, thus allowing Irish business to expand further here and FDI’s to compete with sister plants overseas for investment, all leading to continued job growth and further innovation.

 

Conclusion

 

Given current global challenges like tariffs, conflicts, and supply chain disruptions, it’s essential to focus on controlling input costs where possible. Lowering electricity costs and strengthening the grid are critical for maintaining competitiveness and boosting investment in both local companies and foreign direct investment. Exploring cost breakdowns and alternative financing models, such as public-private partnerships, can help achieve these goals.

We look forward to further contributing to Ireland’s competitiveness through our continued participation in the Cost of Business Advisory Forum.

 

On behalf of the IEA,

 

Simon McKeever

 

 

Chief Executive

 

 

 

 

 

[favorite_button]