Ibec research reveals full scale of Ireland’s energy affordability crisis

Ibec, the group that represents Irish business, has called 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.

“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.

“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.

“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," Ibec’s Senior Executive for Infrastructure, Energy and Climate Policy Conor Minogue, speaking about the findings, said.

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

 

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