Joint Oireachtas Committee Communications, Marine and Natural Resources

IBEC Large Energy Users Delegation

Wednesday, 2nd November 2005

Since 2000……………….

Rapid increase in international commodity prices

Lack of Infrastructural Investment

– 25 year underinvestment legacy

– €3.5 billion currently being spent on electricity networks

Ad-hoc development of energy market

– Absence of a national energy policy

Market Liberalisation

Ireland V’s EU 2005

Electricity Prices 2005

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0.1

Irel

and

Ital

y

Net

herla

nds

Cyp

rus

Ger

man

y

Luxe

mbo

urg

Por

tuga

l

Rom

ania

Slo

vaki

a

Hun

gary

Bel

gium

Spa

in

EU

(15

cou

ntrie

s)

EU

(25

cou

ntrie

s)

Mal

ta

Den

mar

k

Gre

ece

Aus

tria

Slo

veni

a

Cze

ch R

epub

lic

Uni

ted

Kin

gdom

Cro

atia

Fra

nce

Nor

way

Fin

land

Pol

and

Lith

uani

a

Est

onia

Sw

eden

Bul

garia

Latv

ia

€ p

er K

Wh

Eurostat

This indicator presents electricity prices charged to final industrial consumers, which are defined as follows: annual consumption of 2 000 MWh, maximum demand of 500 kW and annual load of 4 000 hours. Prices are given in Euro (without taxes) per kWh corresponding to prices applicable on 1 January each year.

Ireland v’s EU 15 Average

Electricity Cost: Ireland v's EU 15 Average

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0.1

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

€ pe

r K

Wh

EU (15 countries) IrelandEurostat

31%31%

Gas Price – cost drivers

International Commodity Prices

Network Infrastructure Investment

Regulated Tariff Structures– complex structure, cost base,

regulated tariff formula

25% increase 2005/6

Gas Price Trends

Industrial Gas Prices, Jan 2005 (€ per GJ– 4186 GJ per annum with taxes and VAT)

Eurostat

Business Impact - IBEC/Amarach Summary

IBEC/Amarach Energy Survey

– 75% feel they are at a competitive disadvantage

because of energy costs

– Only 3% of respondents passed on increased costs

to their consumers*value of product leaving factory now 5% less than 3 years ago

(CSO)

– 97% absorbed all or part of costs

– 24% of respondents are considering re-locating

business

30,000 manufacturing jobs lost in the past 3 year, 500

currently being lost a month

Short-Term Solutions

Continued deferral of ESB Revenue (€89 million) until commodity prices ease

Investment of dividend paid to Government (€ 184 million, 2002-2005)

Greater flexibility in tariffs

Medium/Long Term

2007-2013 NDP funding for Energy Infrastructure

Publication of a National Energy Policy

National Developmet Fund 2000-2006 € billions

Health, 2.5

Public Transport, 2.8

Environment Services, 3.8

National Roads, 5.9

Social Housing, 7.8

Local Infrastructure, 4.3

Energy, 0.14Education, 2.1

Medium/Long-Term

All-Ireland Energy Market– Bring scale to the market

Stricter scrutiny of regulated market

Liberalisation model??

Maximise efficiency of market players

Security of Supply

Improved Incentives– Supporting initiatives e.g. SEI

Summary

Rapid changes with significant negative business impacts

Industry has responded – increased efficiency, decoupling of intensity and GDP

Need a regime that will balance competitive needs of all energy stakeholders

National Electricity Price Trends – CER Averages

14.1

4.26

12.5

8

02468

10121416

2001 PriceIncrease

2002 PriceIncrease

2003 PriceIncrease

2004/5Price

Increase

2006Increase

% Increase

9+3.5

Actual Price Increases

Business sector 2005 2006

CER Average 12.5% 8%

Mining 21.4% 19.5%

Plastics 13.15% 12.59%

Chemical 20.3% 15.9%

Building Materials 18.4% 15.4

Retail 15.9% 12%

Appendix Slides

Energy Intensity Industry

-40

-30

-20

-10

0

10

% c

han

ge

Energy Intensity % Change toe/M€95 1990-2000

Improvement in energy-efficiency expressed as % change in toe/ M€95 in the period 1990-2000.

Eco-Efficiency in the Industry Sector

EPA, 2005