James Delahunt
Partner, KPMG
Ireland needs to attract low-cost investors to ensure that it can decrease the cost of developing and constructing renewable energy explains KPMG partner James Delahunt
What should policymakers consider when targeting investment in Ireland’s energy sector?
Ireland must design policy that attracts the lowest cost of capital investors to the Irish market. Ireland is competing in an international market for international capital, where lots of other countries are decarbonising. The Renewable Energy Support Scheme (RESS) was attractive given its 15-year Government-backed contracts.
However, the lack of indexation in the recent Government-backed auctions — RESS 1 and RESS 2 — resulted in significant investors in the pension fund community not being interested as they couldn’t match index-linked liabilities with index-linked cashflows. If Ireland attracts the right investment, it will mean cheaper capital, which translates to lower infrastructure costs and ultimately cheaper energy costs for consumers.
What is the total investment requirement to achieve renewable energy targets?
Ireland’s Climate Action Plan target of 80% Renewable Electricity by 2030 will require at least €40 billion of capital to deliver the projects and grid infrastructure required. This is an unprecedented level of capital investment into a single industry but also an economic opportunity for communities and businesses throughout the country.
For example, regional towns near the coasts benefit from port infrastructure as a result of investment in offshore winds. The secondary economic benefits include attracting economic investment, leading to more jobs and a higher standard of living for local communities.
Economic benefits include attracting economic investment, leading to more jobs and a higher standard of living for local communities.
How does this affect household energy bills?
Households across Ireland have experienced unsustainably high energy bills over the past year. In fact, electricity costs in Dublin are the highest in the EU, with Irish consumers paying over €800 annually in excess of the EU average. The shift to renewable technologies will allow for cheaper energy that is independent of geopolitical events that trigger price hikes.
Is this also relevant for businesses?
Yes, a greater level of renewable energy in the Irish energy system will result in more stable electricity prices for businesses as well as consumers. Additionally, there is an increasing demand from businesses that want to power their businesses with renewable sources to reduce their overall carbon footprint, as many businesses develop their sustainability strategies to play their part in addressing the climate crisis. We are seeing this in the form of uptake in corporate power purchase agreements where energy users contract directly with an energy generator, and we expect this trend to continue.