Why does Ireland have the most expensive electricity in Europe? – The Irish Times.

From the very beginning, energy has played a key role in human life. Economists will tell you that mastering new technology has always provided a competitive advantage. In the distant history of humanity, when we were hunter-gatherers, fire was a key technology. Humans are the only animals that have mastered fire, which has given them an evolutionary advantage. Thanks to fire, the energy provider, people gradually conquered the planet. Anthropologists and ancient historians call the first 400,000 years of our species’ history the Age of Fire.

Anthropologist James Scott describes us as a “pyrophyte” species, an animal shaped by fire. The fire kept us warm, allowing us to wander through inhospitable territory. Fire also allowed us to cook, and heating food released energy, allowing us to eat a much more varied diet. Hard nuts were softened with fire, which made our jaws shrink because we didn’t need such powerful jaw muscles – the fire softened them for us. Our stomachs have become smaller and our brains have become larger.

The fire also changed us socially. We have developed a language around the hearth. Conversations allowed our imaginations to speculate about the origins of the world, creating myths and, ultimately, religious beliefs. Fire made us sociable in the first place, as our nomadic ancestors moved from place to place, each place anchored by a common fire.

Because fire itself is energy, and heat releases energy by changing its molecular structure, this amazing technology and humans have been intertwined for millennia. In recent centuries, the Industrial Revolution was in some ways more than just the result of humans finding lots of new things to burn, generating the heat needed to change the molecular structure of all kinds of other things, paving the way for modern chemistry.

The price of energy is important not only for the economy, but also for society. Politically, the price of energy is something both the left and right can agree on. If you’re on the left, expensive energy carries significant social costs. Just think about drying your clothes. Your grandmother greeted a dry and windy day: “Great drying in this weather” is a statement of social fact. Today, in our humid climate, energy costs are so high that a poor family cannot afford to use a tumble dryer. When clothes stay damp and children get sick, the social cost of energy becomes obvious. For the left, lower energy prices are a social imperative.

For commercial law, energy drives the business and represents a significant running cost. A country with higher energy costs will become uncompetitive. High energy prices are a tax on business. If this country is also active in inward investment, comparable energy prices will have a huge impact on the attractiveness of this country compared to others.

This brings us to the price of energy in Ireland.

At the end of 2023, electricity prices in Ireland were among the most expensive in the EU, averaging around €0.44 per kWh. This is almost twice the EU average of €0.22 per kWh. On this basis, the average electricity bill for Irish households with a standard 24-hour municipal meter is approximately €1,374 per year. According to Selectra (the market comparison site), electricity prices in Ireland have almost tripled in the last 12 years as a result of the choices we have made. For example, Scandinavian countries with similar incomes to us pay about half for energy.

Why is this? This is largely because we have adopted a “Sure It’ll Be Great” approach to energy, taking the easy stance of importing other people’s gas rather than investing in our own renewable energy sources. In turn, a country like Denmark can enjoy electricity prices much lower than ours because it has made significant investments in renewable energy sources. In contrast, over a third (34.2%) of Ireland’s electricity was generated from natural gas, and price volatility had a significant knock-on effect on Irish energy bills.

Gas prices have been high since the war in Ukraine – Irish households paid around €0.14 per kWh, which translates into an annual gas bill of €1,258. This is around 1.5 times higher than the EU average (0.09 euros per kWh), with Ireland again among the most expensive countries in the bloc, seeing prices increase by 70 percent since 2020. It is also worth noting that the state itself plays a direct role in these high energy prices. Taxes and fees account for an additional 20-25 percent of the average household energy bill.

Despite high wind and wave potential, our laid-back approach means we rely on imported energy. In 2023, approximately 80% of Ireland’s energy demand was imported. By comparison, Germany, another country struggling with higher electricity prices, imported about 63% of its energy needs, relying mainly on natural gas from Russia, before diversifying its supply after the war in Ukraine. France, on the other hand, is much less dependent on imports due to the significant potential of nuclear energy. Only 45 percent of France’s energy consumption is imported. Nuclear energy provides about 70 percent of electricity. This domestic energy production has largely shielded France from exposure to volatile global energy prices in recent years compared to its neighbors.

Denmark, the leader in renewable energy, imported only about 45% in 2022. its energy from external sources – that is, about half of the Irish rate. Wind power alone provided more than 50 percent of Denmark’s electricity, significantly reducing its dependence on imported fossil fuels.

( Ireland’s fossil fuel use peaked in 2008, but do we have the will to end it?Opens in a new window )

Understanding the hardships many families are experiencing, Budget 2025 includes an avalanche of subsidies, grants and aid for “ordinary” people. The one-off €170 million energy grant scheme aims to provide around €4,000 in support to around 39,000 businesses in the hospitality and retail sectors. Households can also expect electricity loans worth a total of €250, payable in two installments this year and next. Those entitled to benefits will also receive a flat-rate fuel allowance of EUR 300 in November.

All of this is necessary, but it’s hard to shake the feeling that the government is dealing with symptoms rather than causes. Imagine if we didn’t have international income tax money to throw around, masking our basic energy shortage with handouts?

Ireland needs to become more like Denmark – another small country with no local fossil fuels and a cold and wet climate where families need affordable energy. This means switching to local renewable energy sources as quickly as possible: wind, waves and, yes, sun. Quite apart from the climate change implications of renewables, there is a real issue of national security in a conflicted world, as well as providing respite for poorer families and, of course, the overriding economic imperative of cost competitiveness.

An important part of human history is the history of energy. Outsourcing our energy needs is not a sustainable solution, especially when there are local options that could significantly reduce electricity costs. Other countries have done this. Why not Ireland?