Winter is coming

Can Ireland keep the lights on and homes warm?

There are three distinct aspects of the current energy crisis facing Ireland this winter, collectively converging into a perfect storm. We are experiencing unprecedented gas and electricity prices, our electricity system is struggling to balance growing demands with adequate supply, and we face the likely small but possibly devastating risk of gas supply disruptions. Why have we arrived at this point and what can we do about it?

Firstly, the energy price increases are directly associated with our dependence on fossil fuels, in particular natural gas at a time when supply in Europe is limited. The problems began during 2021 and continued into 2022.

As we emerged from the COVID-19 pandemic restrictions, our demands for natural gas increased, due to businesses and public services reopening and associated buildings requiring heating. Manufacturing that had been paused also restarted, some using natural gas for process heat. In addition, electricity demands grew, and with more than half of Ireland’s electricity generated using natural gas, this in turn resulted in a further increase in natural gas. We also saw lower wind energy generation in 2021 due to lower than normal wind speeds, which meant more natural gas was used for electricity generation.

The supply of natural gas internationally has not however kept pace with demand. In April 2021 Europe faced a very cold period, normally a time when demand for heating eases, and natural gas is stored up to be available for the winter. A warm summer in Asia increased the demand for air conditioning and hence electricity, resulting in cargoes of shipped natural gas which could have gone to Europe to meet growing demand, going instead to higher bidders in Asia.

This was of course further exacerbated in early 2022 when Russia invaded Ukraine. The European Union imposed economic sanctions on Russia and in parallel with this, Russia is reducing gas supply to the EU.

The result has been a tenfold increase in wholesale gas prices relative to early 2021 levels.

While our actual gas and electricity bills have not increased tenfold, we have nonetheless seen significant increases in our bills, typically more than doubling relative to 2021. This has increased the amount of households experiencing energy poverty and put huge pressure on businesses.

Secondly, our electricity system faces an increased risk of supply interruptions this winter. This is not due to the reduced availability of natural gas, but other factors.

Over the period from 2005 to 2020, we succeeded in increasing the amount of wind power and nearly halved the annual carbon dioxide emissions from electricity supply, through a successful combination of policy, engineering and societal and community support.

However, wind energy is variable, for example providing about 30% of our electricity in 2021 (compared to about 35% the previous year). Electricity demand also rebounded post COVID-19 and a number of power plants were not available because of delays in maintenance and repairs during 2020 due to the pandemic restrictions.

There were also a number of failed attempts to incentivise new gas fired power plants that would be available when electricity demand is high and wind availability is low.

This combination of factors has led to increased risk of electricity supply interruption this winter. EirGrid did manage to keep the lights on during 2021 and hopefully will again in winter 2022. This will depend on the availability of existing power plants and the electricity interconnector, and how often we experience times of low wind speed and high electricity demand.

Thirdly we face the risk of a gas supply interruption this winter. Russia has effectively turned off its gas entering the EU. The EU has succeeded in filling up most of its gas storage capacity, and increased gas imports comprising shipments of Liquefied Natural Gas (LNG) and increased pipeline imports from Norway, Azerbaijan and Algeria. These will not be enough to offset the absence of Russian gas supplies and the EU recently added a mandatory “best efforts” 15% reduction of natural gas in the period August 2022 – March 2023.

How does this play out in Ireland? From an energy security perspective, on the plus side, Ireland is cushioned by the fact that all our gas imports come from the UK, who previously sourced very little (2-4%) of its gas from Russia. In addition, Ireland gets one quarter of annual gas supply from the Corrib gas field off the Mayo coastline. On the other hand, Ireland is one of three EU Member States with no gas storage facility (since the closure of the Kinsale gas storage facility in 2017). In addition Ireland has no LNG import capability.

What can Ireland do to address these challenges?

The most effective strategy is to reduce our dependence on imported fossil fuels, through a targeted energy demand reduction campaign, accelerating energy efficiency investments and addressing the barriers to increased renewable energy supply. Additional measures are also required this winter.

Protecting vulnerable households this winter through targeted budgetary supports is essential to limit households having to choose between eating and heating. Increased fuel allowances, progressive changes in taxation, free boiler servicing, accelerated free retrofitting etc. should be prioritized over a credit for all households.

Protecting vulnerable businesses from higher gas and electricity prices through targeted budgetary measures, in addition to targeted advice and support on energy demand reduction, incentives for improved energy efficiency, and incentives to use off-peak electricity contributing to electricity supply security.

Aligning with EU proposed price reduction measures is essential, including gathering extra revenues from energy companies and compensating customers, placing a cap on Russian gas prices and increasing liquidity for electricity companies struggling with cash flow problems.

Increasing electricity demand side response measures (such as the penalty for using electricity at peak times) provides an opportunity to enable electricity customers (in particular businesses and manufacturing companies) to mitigate electricity supply risk in particular at times of high demand and low wind.

Ensuring the existing power plants and the required additional back-up power generation are available will help avoid electricity supply disruptions.

Reopening closed conversations regarding gas storage and alternative gas supply in light of the new context we’re facing is essential. The publication of the report on energy security and the consultation process surrounding floating LNG and gas storage are positive steps in this regard.

In conclusion, the greatest of these challenges is addressing the price increases. There is hopefully now a sufficient emphasis in policy discourse on energy security to mitigate the risks of possible electricity and gas supply shortages. Time will tell.

By Brian Ó Gallachóir, Professor of Energy Engineering, University College Cork and Visiting Scholar at the MIT Energy Initiative