Electricity in Ireland: A Critical Review

Electrical grids are actually really cool

Electrical grids are the basis of modern civilization, underpinning lighting, agriculture, industry – and anything that relies on a silicon chip. Yet almost no one knows how they work, in Ireland or elsewhere. Below is my current understanding of electricity in Ireland.

How does the grid supply the right amount of electricity?

Grids deliver electricity from generators, including gas power plants and wind turbines, to consumers. The grid must always ‘balance’, i.e. the amount of electricity must always match demand.

Demand varies across each day and across weeks and months: it is lower when everyone is asleep, and higher when people return home from work and start to stream TV shows. (This varies around the world: in parts of the US, demand is higher during the day when air conditioning is used.) The sheer complexity here can be overwhelming; how can you know in advance whether someone will turn on the lights at 5pm or 5.05pm? Electricity generators and the utility companies (which supply customers) both tell the grid in advance what they expect to use, using various forecasting techniques, and there are a series of auctions to determine what price is paid for that electricity. There is a near-guaranteed baseload (e.g. people rarely turn their fridges off), and so it’s only the marginal demand that must be forecast and met with supply.

In Ireland’s case, as in Britain’s, the market is set up on a ‘pay-as-clear’ basis (N.B. Ireland’s electricity market is a cross-border, all-island affair). Power plants and generators offer to produce electricity for a given time at a given price, and utilities offer to buy that electricity at a given price (they will in turn sell it to customers). The highest bid becomes the clearing price for the time period and is paid by the utilities to the generators. This ensures that there is enough electricity for everyone to use in that time period.

What happens if too much electricity is produced? Every half an hour, the grid checks whether too much electricity is produced, and if so, offers to pay producers to stop producing. This means that at the windiest times in the year, turbines are being turned off because there is too much power!

Where does the electricity come from?

Traditionally, Ireland has generated its electricity in plants that burned fossil fuels. These plants could easily produce more or less electricity according to the needs of the grid. The following graph of Irish electricity use gives a sense of the dominance of fossil fuels; renewables are barely present until about 2008.

This has changed in recent years; in 2020, the island met 43% of its electricity demand with renewable energy. Naturally, governments north and south of the border are trying to increase the share of power generated by renewables – both are targeting net zero by 2050. 

Solar has less potential in Ireland than wind (unsurprisingly!). Load factor refers to the amount of a generator’s capacity that is used in a typical year – for wind turbines, Ireland’s average load factor is about 30% – roughly comparable to, say, the USA. Solar’s load factor in Ireland is as little as 9.9% – a far cry from 29% in Arizona. This hasn’t stopped solar projects from being developed in southerly counties in particular, but wind clearly has a comparative advantage in the emerald isle.

Unsurprisingly, then, wind dominates the renewable mix in Ireland and Northern Ireland.

Why is Ireland so dependent on gas?

Wind and solar are very weather-dependent. As explained in a previous essay on the Fitzwilliam, this means that gas remains the marginal supplier on the grid, i.e. it’s the source of energy when wind and solar can’t match demand from consumers. The divorce of renewables and natural gas will be complicated and messy. 

The pay-as-clear rules of the wholesale market mean that high gas prices in times of low wind are passed onto consumers for every unit of electricity they use. Thus, even if only 1% of the electricity on the grid in a given time period came from expensive gas plants, every utility company must pay that high amount – even for the 99% of electricity that came from renewable sources.

Not only is gas the marginal source when it comes to meeting electricity demand, it also heats about 30% of Irish homes, with oil heating a further 40% (figures from 2016. The rest comes from electricity, peat, and a mysterious ‘other’ category which likely includes wood/biomass and LPG). Irish people are exposed to unusually high gas (and oil) prices because of this, and the war in Ukraine only worsens the situation. While Ireland has some domestic gas production, the sites are mostly depleted, and 53% of Ireland’s gas is imported from the UK. Relying on imports will make it difficult for Ireland to have truly cheap electricity. 

Is the grid being run properly?

The grid in the Republic of Ireland is managed by Eirgrid, a government monopoly that also controls SONI (System Operator for Northern Ireland) and, in turn, Northern Ireland’s grid. 

A spate of recent stories has highlighted how Eirgrid may be passing an unfair amount of costs to SONI (£17m is quoted, but it’s unclear how much of an increase that is on previous figures). SONI’s costs have apparently risen consistently, and SONI was unable or unwilling to challenge its parent company here. The net result is that Northern Irish customers may have been overcharged for their electricity.

There is scant context for these claims online – the issue is dry enough not to receive proper treatment from the Irish media, with Sam McBride one of few journalists to dig beyond official press releases. McBride has highlighted further oddities in SONI’s behaviour – why does a government-owned monopoly spend money sponsoring rugby competitions and creating TV ads?

Where we should take the grid

The most pressing issue for the grid right now is high prices, on both sides of the border. As discussed, Ireland’s energy dependence on the European mainland means it is beholden to high global prices for gas, and, in turn, electricity.

There are other issues on the horizon. Future capacity on the grid is developed using auctions, in which companies can bid to provide capacity in years ahead. Increasing electricity demand on the island could mean a shortfall in capacity as early as 2024. As a result, Ireland is building nine new gas plants in an effort to bolster supply when it can’t be met by wind. 

One option to get away from natural gas is nuclear power. I want to see us build new, modern reactors in Ireland, but there are several drawbacks worth mentioning.

First, the output from nuclear power plants is difficult to change according to the needs of the grid. No doubt the latest reactor designs would be superior to the old, but this does limit nuclear’s ability to meet the variable needs of modern economies. It could handle the baseload, but we’d still need different sources of energy.

Additionally, Ireland does not have any indigenous supplies of uranium or other radioactive elements, so would rely on imports from abroad. This doesn’t feel like a big improvement on our reliance on imported gas.

I don’t want to say we can’t do hard things (that would be ‘cheems’). But there is a simple solution to the issues on Ireland’s grid, one that is much less controversial than nuclear but no less exciting and ambitious: batteries.

Large batteries can store electricity from Irish turbines whenever it’s windy, and release it onto the grid when it’s needed. They are an essential part of Ireland’s future grid infrastructure, so it’s great that we’ve already started to install them. We need to ramp up these installations, and build more turbines to go along with them. 

The definition of ‘battery’ is quite extensive. Electricity can be stored in potential energy by raising and lowering water, or through the creation and burning of hydrogen. 

Batteries are key to taking full advantage of the wind resources we already have at our disposal. Ireland’s grid actually limits the amount of electricity that can be generated from wind, and instructs turbines to switch off (‘dispatch down’) in periods of high output, because too much electricity is being produced. In 2019, 710,000MWh was lost due to this limit – enough to power the city of Galway for a year.

This limit is in place for various technical reasons, including the need to have a source of electricity that can be ramped up in the short run, and constraints on local electricity systems (the local grid in Donegal, say, may struggle to handle lots of output from turbines, even if the grid as a whole could handle it). Increasing the amount of battery storage in Ireland can help smooth the output of these turbines, and integrate them more completely onto the grid – allowing us to increase the limit on how much electricity can come from turbines.

My take on electricity, explained with a doge meme. Source.  

There are several other ways we can improve the grid. The efficiency of turbines is much higher offshore, and so far Ireland hasn’t tapped into this opportunity. Offshore installations can take advantage of our extensive coastline, and boost economic activity in areas that have stagnated in recent decades.

As well as changing supply, we can also help the grid balance by altering demand. Changing the amount of energy consumers are using is known as demand-side response. This is already being done in Ireland, but it could be a lot more widespread and sophisticated. It will be helped by the ongoing roll-out of smart meters in Ireland (the government aims for these digital meters to be in every home by 2024). A future beckons where consumers can charge their electric cars, or even large domestic batteries, at times when electricity is cheaper – this would help smooth demand, and take advantage of periods of high wind.

Another approach to smoothing out demand is to increase the size of the grid. The proposed Celtic Interconnector would link Ireland’s grid with France directly, and electricity already flows between Ireland and mainland Britain. 

Whether Ireland takes the radical step of legalising nuclear power or simply focuses on renewables plus batteries, the grid must adapt if we are to supply Ireland’s growing electricity needs.

What use is more electricity? 

When people discuss using more electricity in a developed economy like Ireland’s, it’s hard to avoid a nagging sensation that it isn’t really necessary. Sure, cleaner and cheaper electricity would be great, but do we need more of it? Wouldn’t that encourage wastefulness?

In the 20th century, it was normal to use more energy. Energy use grew at around 7% annually in America and several other rich countries, a trend called the ‘Henry Adams curve’. This broke down sometime in the late 20th century, depending on the country. Energy consumption in most rich countries has since been stagnant and per capita consumption has been going down.

In many respects, this is a positive trend, as it represents much greater efficiency. But it’s important to get clear on why generating more electricity in Ireland would be good. First, making more electricity is the best way to make it cheaper. It’s simple supply and demand – if we boost the supply, the price will fall. This will make living in Ireland more affordable. Even for a middle-class family, cheaper energy would be a real blessing (especially for children, whose mothers would be less cross when the immersion was left on).

There are also many business benefits to cheaper energy. Electricity is a significant line item for firms of all shapes and sizes, from farmers (milking machines, lighting for sheds) to restaurants, shops to manufacturers. Making electricity cheaper would boost firms’ profits, lower prices for consumers, and encourage them to shift away from polluting fossil fuels – win, win, win. 

One industry in particular is growing fast in Ireland and is hungry for power: data centres. They already account for 11% of Ireland’s electricity use, and this is set to grow, perhaps to 30% or more. In fact, such is the strain that these new data centres are putting on the transmission network in Dublin, Eirgrid isn’t allowing any new data centres there until 2028.

We should invest heavily in improving the Irish grid so that we don’t have to impose these kinds of restrictions on businesses, and reap the benefits of being a European data centre. In fact, cheaper electricity means cheaper compute in general, and Ireland could use that to cultivate new industries like crypto and biotech.

If computation isn’t your thing, cheaper electricity could also be used for new kinds of farming, industry, carbon capture, and more. Vastly cheaper energy is one way to stimulate economic growth in Northern Ireland, where demand for electricity is stagnating, reflecting its wider economic ill-health. Cheaper bills would also make children more affordable, which could help reverse the decline in the Irish birthrate.

We should take radical steps to ensure Ireland has a cheap, abundant, and secure energy supply – the better to underpin economic growth for decades to come. 

Fergus McCullough works at an energy startup and is a member of Tyler Cowen’s Emergent Ventures program. You can read more of his writings on his blog.