Sean Barrett (Independent)

It is always a pleasure to hear the Minister, Deputy Rabbitte, and his knowledge and wit are welcome in any debate.

The Taoiseach, in the competitiveness challenge report for 2011, stated that renewed international competitiveness is central to any Irish economic recovery. This is the problem I have with the Irish energy sector. It is not competitive and it is not thoroughly enough regulated by the Commission for Energy Regulation. This is a sizeable obstacle in the economic development of the country.

The Forfás report on energy competitiveness found that in the first half of 2011 Ireland was the sixth most expensive country in the EU for electricity prices for small and medium size enterprises. The reason I feel the Commission for Energy Regulation has not been active enough is that we know the ESB in particular is a low productivity and extremely high wage company, witnessed only last Saturday. This was pointed out in the McCarthy report on the disposal and performance of State assets published in April last year. Regulation which does not go into the high cost base of the ESB and extract these monopoly rents and pass them on to consumers in the form of lower prices does not serve the Irish economic recovery. A shoal of countries including Finland, France, Sweden and the United Kingdom have cheaper energy and electricity costs than we do for small and medium size enterprises.

To quote a phrase of the Minister, Deputy Howlin, this is an area where policy is captured by producers and the costs are borne by the rest of the economy. If we go too far in the direction of very high cost renewable energy sources - and some of them are extremely high cost - we will damage the competitiveness of the overall economy because people must buy this electricity at inflated prices.

In its review of the Irish economy the OECD recommended that we phase out supports for offshore wave and tidal energy because they are not commercially viable. At present they are financed through a public service obligation payment which costs €118 million. Of this the direct subsidy to peat is €40 million, with €36.5 million going to renewable energy generation and the remainder accounted for by administration and capacity related expenditure. We are rigging the market in favour of some of the renewable sources which the OECD states are not competitive.

There are also great doubts about electric cars, which were mentioned by the Minister. If one takes what a normal car puts into the Exchequer one can put a minus sign with regard to the same car if it is electric. It would require a subsidy equal to the tax payment so one loses on the double. Looking through the report there are also great doubts about biomass, which is an activity completely dependent on subsidies, and with regard to combined heat and power schemes.

Much of the debate has been dominated by things that are possible in engineering terms but not affordable in terms of what this economy is trying to achieve. I welcome the Minister's statement that the International Energy Agency would report on energy policy. I look forward to reading the report soon. There is a belief that wave energy in Ireland is free or low-cost but it is not. It is more expensive than the alternatives and this is why we must subsidise it through the backdoor mechanism of the public service obligation which is borne by consumers. Many of the other energy options which must be stood up by the Minister and the Department in the face of economic analysis are likely to increase the cost base of the Irish economy rather than reducing it.

Moving the renewable energy sources target to 40% in electricity has been estimated by the National Competitiveness Council to add approximately 10% to electricity bills because the more expensive options are being chosen all the time. A proposal was made, which is commented on by the McCarthy review, to raise this 40% to 42% but each time it is raised high cost options are brought into play and it damages the competitiveness of Irish industry.

I welcome the prospect of the gas find in Leitrim and Fermanagh and the bringing on shore of the Corrib gas. This could change our position with regard to being dependent on imports. For each of these changes we must recalculate the numbers on whether these renewable projects are worthwhile. There has been an almost religious zeal that these are meritorious projects which are so obviously better than importing lower cost fuels from world markets. This must be stood up with better numbers than those with which we have been supplied.

There is fear among economists that the Department is captured by the producers of energy and the promoters of various expensive schemes and that the consumer does not get sufficient attention. In this case, the consumer is Irish industry, which must compete worldwide. The cost base of the ESB, not only with regard to the chief executive being paid more than twice what the Taoiseach earns but the average cost base, includes numbers reported in 2006 of €142,000 being the average wage in the Poolbeg power station.

If we are to become competitive again on the international stage we must look at these burdens on Ireland's competitiveness even if they have a certain trendy association, such as alternative energy, because they damage our international competitiveness. I look forward to the upcoming review the Minister mentioned. I am grateful to the Senators opposite for tabling the motion because we need to discuss why many of our competing countries have lower energy costs than ours.