EU energy efficiency policies under fire in Ireland

One of the main elements of the 2012 EU Energy Efficiency Directive is a requirement to have energy distribution and retail companies provide measures to consumers that achieve quite ambitious targets. Member states are allowed alternative measures but not all have opted for that. The Irish Times had a news item this week stating that one of the electricity and gas suppliers is now taking legal measures to challenge the obligation, stating that it impairs its ability to compete with larger rivals. It will be interesting to follow the upcoming developments.

 

Energia challenges State’s energy efficiency obligations

Electricity and gas supplier Energia claims new obligations imposed on it by the Government to meet EU energy efficiency targets will lead to an extra €22 on the average €950 annual bill of its residential customers.

This will “significantly impair” its ability to compete with larger rivals like Electric Ireland and Bord Gáis Eireann, it says.

Veridian Energy, trading as Energia, secured leave from the High Court on Tuesday to bring a challenge against the Minister for Communications, Climate Action and Environment, over the way the new requirements are being implemented.

It wants various orders and declarations, including quashing an energy efficiency notice issued by the Minister last December.

It claims the notice is unlawful and the imposition of sectoral efficiency targets is outside the powers of the 2014 EU regulations which brought in efficiency obligations for member states.

Imported energy

The targets are designed to address EU dependence on imported energy in the context of the need to limit climate change.

The regulations require member states to take specific actions with a view to achieving an energy efficiency target of saving 20 per cent of the EU’s primary energy consumption by 2020.

In practice, it means energy suppliers must meet efficiency targets in both the residential and non-residential sectors whereby users are encouraged to reduce consumption through efficiency.

When the requirements were first introduced in 2014, Energia was required to meet certain sectoral obligations and was able to do so, Energia retail director Gary Ryan said in an affidavit.

Last December’s notice changed those obligations significantly, he said.

Up to 2016, its obligations were divided on a 91 per cent basis for the non-residential sector and nine per cent for the residential sector, including 1.5 per cent for “energy poor” households.

Under the new obligations, the non-residential is 75 per cent and the residential is 25 per cent, including five per cent for the energy poor sector.

Mr Ryan said this has created very serious difficulties for Energia which has just 141,000 residential customers, compared to Electric Ireland’s 1.3 million and some 668,000 for Bord Gáis.

Fulfilling targets

The cost of fulfilling those targets for Energia would add two per cent, or about €22, to the average €950 annual bill of Energia customers, Mr Ryan said. That same figure for its competitors is about 0.63 per cent, he says.

As a relatively new entrant to the residential market, the vast majority of Energia’s customers are on highly competitive tariffs/discounts which leave the company little opportunity to earn a reasonable retail margin or offer additional discounts, he said

It is unlawful for the Minister to impose on Energia a proportion of energy savings for the residential sector “entirely out of sync” with the proportion of its business in that sector, he said.

The Minister had told Energia he was bound by guidance of the Sustainable Energy Authority of Ireland (SEAI), he said. He believed and was advised the Minister cannot be bound by such guidance in the discharge of his statutory role.

In correspondence with Energia, the Minister had said the December 2016 efficiency notice was entirely consistent with the 2014 regulations and the Minister’s statutory duties.

Mr Justice Seamus Noonan granted Energia’s ex-parte (one-side only represented) application for leave for judicial review and returned the matter to next month.

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