Ibec research reveals full scale of Ireland’s energy affordability crisis
Ibec, the group that represents Irish business, today calls on Government to strengthen business supports after new research shows the full scale of Ireland’s energy affordability crisis. The survey of Ibec members shows that average gas and electricity prices increased by 90% and 60% respectively in 2022 with further increases expected next year.
Speaking about the findings, Ibec’s Senior Executive for Infrastructure, Energy and Climate Policy Conor Minogue said: “Energy costs increased for all sectors in 2022 eroding profitability and threatening business viability. The research also shows that business exposure to high energy costs will continue into 2023 as more and more businesses exit contracts and lose pre-crisis hedging arrangements. Businesses are forecasting gas prices to be three times higher in 2023 than last year and electricity costs 2.5 times higher. While wholesale gas prices have fallen from the exceptional heights we saw in August, the market remains volatile and prices still remain well above normal levels.
Commenting on the need to strengthen business supports he said: “It is vital that the support framework reflects the scale of the crisis and delivers effective support to viable but vulnerable businesses. While the Temporary Business Energy Support Scheme (TBESS) and Ukraine Enterprise Crisis Scheme (UECS) announced in Budget 2023 are providing welcome support to many businesses, the eligibility criteria and support levels remain too restrictive. Our research shows that of the 39% of companies reporting at least a doubling of their electricity or gas costs in 2022, only one quarter of these could qualify for the UECS scheme in its current design. The support levels are also below that seen in other European countries, putting Irish businesses at a competitive disadvantage. Ibec has already submitted recommendations to Government on how the support schemes could be made more effective.
Commenting on the decarbonisation opportunities he said: “Throughout this crisis, businesses have not lost sight of the long-term imperative to transition away from fossil fuels. And with costs so high, projects that were once financially unviable may now make sense. Our research shows that 55% of respondents are planning an energy efficiency upgrade in 2023, while 49% plan to invest in renewables.
Amongst the key findings were:
- Average business expenditure on gas increased by 90% on 2021 levels
- Average business expenditure on electricity increased by 60% on 2021 levels
- Firms are forecasting gas costs to be three times higher in 2023 than last year
- Firms are forecasting electricity costs to be 2.5 times higher in 2023 than last year
- Most remaining pre-war hedging arrangements will come to an end in January 2023
- 70% of respondents are forecasting reduced profitability for 2022 because of energy costs
- 49% of respondents plan to invest in renewables in 2023 to reduce energy costs
- Of the 39% of companies who reported a doubling of their energy costs, only one-quarter of these could qualify for the UECS scheme
Ibec is calling on Government to:
- Extend the TBESS to the end of 2023
- Redesign the UECS so it aligns with the new EU State Aid guidelines and provides effective support to more businesses
- Enhance state supports for renewable energy adoption and energy efficiency projects
- Address planning and installation barriers to the roll out of Solar PV in industry
- Work with industry to develop new incentives for participation in the Demand Side Unit Capacity scheme
– The research was conducted in October 2022 and surveyed 384 companies across a wide sample of business sectors.