Eamon Ryan (Dublin South, Green Party)

In the past year, gas prices have not followed oil prices, which have fallen from $147 per barrel to $40 per barrel. While gas prices have also declined, the fall has not been on the same scale as the fall in the oil price. I will address the reasons electricity prices will decline this year in a moment.

The first reason for higher energy prices in Ireland is, therefore, the lack of diversity of supply and our reliance on fossil fuels. The second reason is the poor availability of certain plant at one time and the tight situation between supply and demand. In 2003 and 2004, during a period of rapid economic growth when new data centres were coming on stream, we did not have sufficient power to meet demand. This helped drive up prices and the problem was exacerbated by the fact that a small number of older and difficult to run plants were not available. It had a significant effect in driving prices higher because we were forced to turn on emergency generators to cover those plants which were not available. That is the background to understanding an analysis as to what was happening and why our prices were higher.

I believe we will be able to lower prices. It is happening and will continue to happen in a steady, progressive manner. We will see lower prices this year because of forward projections. In this market one has to look forward because companies, contractors and power generators buy forward and contract forward for their customers, so one has a fairly clear idea when looking forward at to what the future price of gas will be. Looking at prices at the moment, unless they shift radically within a short period of time, we can expect to see a double digit reduction this year, which would be very welcome.

We will see the problem of supply and demand being addressed. We will see additional plants come on board, such as large gas fired plants in Cork developed by the ESB and Bord Gáis. There will be a welcome number of new competitors coming into the country, which will make significant investment and are taking some of the older plants and investing in them to upgrade them and have them available for use. This is significant.

People will have read in the newspapers about the introduction of new competitors, such as Endesa, which is a large, international, experienced, well-capitalised utility, to Ireland. There was a fundamental shift in the Irish electricity market when it signed a contract two or three weeks ago, and signed up its willingness to invest more than €800 million in this economy and invest further as we progress as a fair, well-regulated market. It was a significant development.

We have seen the arrival of Viridian, Bord Gáis, Bord na Móna, Airtricity, Mainstream Renewable Power and a number of other electricity providers. We have achieved the objective, set for many years, of delivering a competitive market. We are at the point of achieving a competitive market in the mainstream public supply market, where the average householder has seen high electricity prices.

The introduction of competition and the successful development of a policy which has come to fruition in recent weeks with the introduction of major new international competitors into the Irish market gives great hope and succour to Irish industry that it is now dealing with an industry where there are a number of major player who are well capitalised and will compete for business. That will bring prices down, not just this year but next year and the year after. We must make sure we stick to the correct policy approach and the regulated system we have, which is the best way to manage a competitive market.

There was an interesting report presented by the regulator last week which backed up the analysis done by Government. It indicated that the higher renewables target set, which is 40% of renewable power generation, will have a significant further dampening effect in bringing down prices. Every wind turbine we can put up will have an immediate effect on diversifying our supply and helping bring down prices. In 2020 with the higher level of 40%, we could see a reduction of approximately 15% in prices compared to what a low wind scenario would be.

The fundamental analysis and policy approach is working and will bring an immediate reduction in gas prices. In energy policy one must always have a long term direction because it brings immediate returns. The long term success we are now having in bringing in competition and diversifying supply will continue to bring prices down and make our country competitive. There is an equation between getting a clean supply and a secure supply because competitive forces and environmental aspects of developing renewables will complement our competitive approach.

I will address a number of the points made by Deputy Coveney. The review mentioned was signalled in a Government economic policy paper before Christmas. It complements the ongoing review work the regulator must do on tariffs. I have asked the regulator, in conjunction with the energy companies, to see if there are ways we can fast track some of the changes coming and bring forward some of the price reductions expected through proper regulatory systems. We do not want to undo that good policy and create false and unfair market which, more than anything else, keeps electricity prices here high.

There are a number of options we can look at to bring prices down more quickly. We know prices will fall but perhaps we can bring that forward more quickly. One option we should be careful of and avoid is a unilateral reduction, which Deputy Coveney might argue for, that the ESB could favour or introduce. The reason it should be avoided is that it could easily be used as a competitor tool to ensure nobody enters the public supply business, which is not easily profitable or easy to get into. If a company comes into this country, spends significant amounts of money and has a sense that it was effectively locked out because there would always be a pricing mechanism to keep it out, it is a real risk.

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