IRELAND’S HEAVY USE of gas for electricity generation is one of the main reasons prices here are so high, according to researchers at the ESRI.

In 2024, Ireland had the highest electricity prices in Europe, excluding taxes and energy credits, the researchers found.

This was up from having the third highest prices in 2018.

When Irish government energy credits and VAT reductions in 2024 were taken into account, as well as higher taxes and levies in some other countries, Irish prices were the eighth most expensive in Europe.

“Irish energy costs are higher than average and particularly exposed to the international price of natural gas,” the researchers said.

“This has imposed a considerable additional cost on consumers.”

Deploying more renewables would provide an “immediate benefit” to Irish consumers, the researchers said.

That’s because a greater share of renewables on the grid would reduce Ireland’s exposure to international wholesale gas prices.

Even as of the end of last year, before the current US-Israeli war on Iran, gas prices were projected to remain higher than they were before Russia’s invasion of Ukraine. European gas prices have soared since the US and Israel attacked Iran in February.

“Renewable deployment provides an immediate benefit to the consumer,” the ESRI researchers said.

However, they said the magnitude of this impact could not be predicted, as the cost of subsidising renewables development is uncertain and also needs to be taken into account. The researchers noted that the cost of renewable electricity will fall as technology, such as floating wind turbines, matures.

Niall Farrell, associate research professor at the ESRI and one of the study’s authors, said many other countries have reduced their reliance on gas-fired generation in recent years.

“Renewables provide an important hedge against fuel price volatility,” Farrell said.

Energy credits that softened the cost to consumers of Ireland’s expensive gas use in 2024 were scrapped in last year’s budget.

The ESRI found electricity network costs (charges to maintain the system) were not a significant factor driving high household electricity prices, despite these costs going up between 2018 and 2024.

However, these network costs could add between €59 and €106 to households’ annual bills by 2029-2030.

Adjusting for purchasing power, Irish electricity prices are closer to the EU average. However, the researchers warned that electricity prices themselves affect the general cost of living, so this finding needs to be considered carefully.

Gas generates about 40% of Irish electricity, according to data from Gas Networks Ireland, with renewables also accounting for about 40% according to the Central Statistics Office. Ireland is also heavily dependent on gas for heating, with 37% of homes using gas.

International research shows that even during periods of relatively stable market conditions, gas costs strongly influence electricity pricing. For countries with a heavy reliance on gas-fired generation, gas has a particularly strong influence on electricity prices.