This comprehensive paper provides an in-depth analysis of electricity costs in Ireland, exploring the key cost components, challenges, and opportunities in the current energy landscape. It offers a clear breakdown of electricity cost drivers—from the role of imported gas in our energy generation, to network expenses and policy levies such as the PSO—and examines how these factors impact Irish households and businesses.
Importantly, this paper reflects the collective view of industry on the actions government can take to alleviate the electricity cost burden on Irish consumers and businesses. It outlines a series of actionable recommendations and policy measures that align with key EU and national objectives relating to competitiveness, affordability, energy security, and climate action. Our recommendations are framed within the context of major EU policy drivers such as the European Green Deal, the Fit for 55 Package and the Energy Performance of Buildings Directive which collectively set binding targets for emissions reduction, renewable energy deployment, and energy efficiency improvements for member states. Our recommendations are further informed by Eurelectric’s output.
At the national level, these binding targets filter down to Ireland’s Climate Action Plan, and the Programme for Government 2025 – Securing Ireland’s Future– all of which will be central to driving a more cost efficient, low-carbon, fair and secure energy future for Ireland.
Our paper is structured and presented in a way to guide policymakers and industry stakeholders through the complexities of electricity costs, while proposing practical, industry-backed solutions to manage and reduce costs fairly and sustainably for all cohorts of Irish society.
Key topics covered in our paper include:
- A cost breakdown of electricity generation and supply
- The impact of international energy markets on Irish prices
- The role of policy levies and regulatory charges
- Network infrastructure costs and investment challenges
- Recommendations for targeted government interventions for low income and vulnerable cohorts of society
- Opportunities for renewable integration
This paper aims to support constructive dialogue between government, industry, and other stakeholders to ensure that cost management strategies are effective, equitable, and aligned not only with Ireland’s broader energy transition goals, but also with its growing focus on cost, affordability and competitiveness.
Managing Electricity Costs in Ireland: Challenges and Opportunities
The context for our paper is that in recent years, electricity costs in Ireland have risen sharply, placing significant financial pressure on both households and businesses. This surge has been driven by a combination of external geopolitical events and structural challenges within the Irish energy system. As Ireland continues its transition toward a cleaner energy future, understanding the components of electricity costs—and identifying sustainable, long-term solutions—has become more important than ever.
While many of the underlying pressures lie beyond the control of national policymakers, there are meaningful actions the Government can take to help ease the burden. These include reforming network tariffs and electricity taxation, increasing public investment in grid infrastructure, and introducing targeted measures to support vulnerable households. Promoting energy efficiency across homes and businesses also presents a valuable opportunity to reduce consumption and lower bills.
Coupled with Ireland’s offshore wind resources which is widely recognised as a key strategic asset with significant untapped potential, these recommendations offer a pathway to both reduced electricity costs and enhanced energy security. By leveraging these resources alongside the policy measures outlined above, EAI’s recommendations can be effective for Government to deliver a more cost-effective, just, and secure energy system for all.
Breaking Down Electricity Costs in Ireland
Our paper outlines that Electricity prices in Ireland are made up of several components, each reflecting different aspects of the energy system:
- Energy Costs (55%): The largest share comes from the cost of generating electricity, which is heavily influenced by volatile global gas prices.
- Distribution and Transmission (29%): Due to Ireland’s dispersed population and geography, infrastructure costs are among the highest in Europe, with the country requiring twice the length of network per customer compared to EU peers.
- Imperfection Costs (7%): Operational costs linked to managing the electricity grid, which have increased due to higher gas prices but are expected to fall as infrastructure improves.
- Capacity Costs (6%): Costs to ensure enough electricity supply during peak demand periods, rising in line with increased energy needs and inflationary pressures.
- Public Service Obligation (PSO) Levy (3%): A charge supporting renewable energy development, which fluctuates based on wholesale electricity prices.
- Other Policy Costs: Additional levies supporting energy efficiency and renewable heat initiatives, expected to grow with Ireland’s decarbonisation efforts.
Our Key Recommendations:
Empowering Customers
- Develop and implement a sustained national multi-stakeholder media campaign of customer engagement to unlock the full benefit of smart meters, energy savings, and energy efficiency initiatives with regular reviews to assess its effectiveness against clear KPIs. This would ensure that public investment delivers meaningful outcomes in awareness, behaviour change, and energy reduction.
- Tailor communications to different customer segments.
Government Support for Investment and Cost Minimisation
- Maintain and enhance support for Energy Efficiency and Electrification.
- Expand grant supports for solar panels, heat pumps, and electric vehicles to reduce the upfront cost burden on households and businesses and ensure that grant values keep pace with inflation.
- Extend the 0% VAT for heat pumps and EV chargers – as is currently the case for solar panels.
- Extend the 0% VAT rate beyond March 2027 to ensure continued affordability of energy-saving upgrades.
- Raise awareness of the low-cost financing options currently available to support wider access to energy-efficient technologies, along with seamless customer journeys to make the process easy for customers.
- Review international best practices regarding home retrofit policy.
Increase the Electrification of Society
- Our paper, Electrifying Society (part of the Our Zero e-Mission Future series), identifies electrification as essential to reaching climate targets. Increasing the use of renewable electricity and electrifying sectors like heating and transport can cut emissions, support the electricity system, and improve energy security by lowering dependence on fossil fuel imports.
- Through electrifying new loads of heat and transport, efficiency gains from direct electrification and increased overall electricity consumption distributes the cost of investment among more electricity customers.
Rebalance Electricity Taxation
- Maintain the 9% VAT rate on electricity bills.
- Maintain the €400 income tax exemption on selling excess renewable generation back to the grid.
Fund a Greater Share of Infrastructure through the State Exchequer
- Fund a greater proportion of electricity infrastructure through the State exchequer.
Tariff Review
- Review tariffs to encourage innovation and change by maximising the use of the grid during off peak times and incentivising demand during peak Renewables production.
Targeted Measures to Alleviate Energy Poverty
- Review the potential impact of alternative tariff mechanisms, taxation measures, or energy credits to identify impacts and benefits for vulnerable groups and to assess the potential impact on energy efficiency action.
- Implementation of the Clean Energy Package for all Europeans, adopted in 2019.
- Reduce electricity costs for vulnerable families.
- Retain the current electricity allowance option for Customers over 65 as part of the Household Benefits Package.
- Reform and expand the free electricity allowance as a targeted measure to assist low income and vulnerable groups.
- Ensure inclusivity in Energy Efficiency Schemes through prioritisation of vulnerable groups.
- Expedite ESRI’s current development of a national multi-indicator framework for energy poverty.
Enhanced Measures to Address Non-Engaging Customers in the Retail Market
- Use existing data to report disaggregated data on the quantum of debt held by customers.
- The introduction of early intervention mechanisms such as debt flagging to prevent large debt accumulation.
- Clear pathways to manage cases where disconnection may be necessary as a last resort in high-debt, non-responsive situations.
- Undertake a comprehensive review of the current list of qualifying electricity dependant medical equipment and devices to ensure that the focus is on electrically powered lifesaving or mobility equipment.
Conclusion
Ireland’s electricity costs are shaped by a complex interplay of global geopolitical pressures, and distinct domestic challenges, including infrastructure demands and evolving policy landscapes. Addressing these requires a comprehensive approach, as outlined in our recommendations: accelerating investment in renewable energy, increasing electrification, rebalancing electricity taxation, enhancing government support for infrastructure, and implementing targeted measures to alleviate energy poverty.
By implementing these recommendations, Ireland can reduce reliance on volatile fossil fuels, modernise its electricity network, and establish a transparent, fair, and inclusive cost framework. This will protect consumers from price shocks, unlock significant economic benefits, and advance the country’s climate commitments. Ultimately, a reformed and resilient electricity system will provide all households and businesses with reliable, affordable, and sustainable energy — powering a prosperous future for Ireland.
Link to our full paper: 20250908 EAI Finalised Costs Paper.pdf