Government to provide grants to businesses hit by rising energy costs during winter months

The government is preparing a new energy support fund to provide multimillion euro grants to businesses hit by surging gas and electricity costs this winter, the Business Post can reveal.

It’s understood officials in the Department of Enterprise and Trade are working on a new scheme where businesses that can show that they have been unable to pass on rising energy costs to their customers will be able to apply for direct grants from the state. These grants will be capped at a maximum of €2 million for small businesses, and up to €25 million for large, energy-intensive firms.

The Business Post understands, however, that the scheme will not be available to every business in the country hit by rising energy costs.

Instead, the energy grant scheme will be targeted at a “very small number of firms” in the export manufacturing sector where profit margins have been narrowed considerably or the business is trading at an operating loss because the firm is unable to pass on the spike in energy price to its end customers.

The planned new energy subsidy scheme will be rolled out this autumn so qualifying businesses can apply for funds ahead of the winter months, when European gas prices are forecast to be at very high levels.

To qualify for funding under the scheme, the Business Post also understands that businesses are likely to be required to reduce their gas use, or switch to an alternative renewable energy source.

It comes as the European Commission last week called on all member states to cut natural gas consumption by 15 per cent over the next eight months in a bid to offset the emerging energy crisis in Europe.

The Nord Stream 1 gas pipeline between Russia and Germany recommenced supplying gas last Thursday, albeit at much reduced flows. Gazprom, the Russian pipeline operator, said gas supplies were likely to be less than 50 per cent of normal levels.

Despite the expected gas shortages across Europe, Irish gas consumption is now forecast to increase by almost 6 per cent this winter, according to projections from Gas Networks Ireland, which runs Ireland’s gas grid.

Industry sources said the expected increase is being driven by rising demand from the electricity sector, where the increasing number of data centres connected to the power grid has driven up consumption over recent years.

Eirgrid, the national grid operator, refused to release information on the exact number and volume of data centres that had been connected to the grid since the beginning of the year or were due to be connected in the months ahead. The volume of energy required for data centres has more than doubled in the last five years, and could triple again by the end of the decade under Eirgrid’s current projections.

Ireland will import 200 megawatts (MW) of emergency gas generators this winter to try to facilitate this additional power demand, while a further 450MW of emergency generators will be imported the following winter to meet an expected further growth in power demand as well as the long planned retirement of the Tarbert oil-fired power station in Co Kerry.

Despite the European Commission’s call for member states to reduce emissions, the Irish government is expected to seek flexibility on the demand reduction plan, arguing that Ireland’s gas supply system is interlinked with Britain’s and has no direct connection to the continental European system.

Conor Minogue, a senior infrastructure, energy and climate policy executive at Ibec, the employers’ group, said gas rationing was undoubtedly a risk for businesses this winter, but added that Ireland was better insulated than most European countries due to our reliance on the British gas system.

“Britain has an incredibly diverse gas system, where it gets supply from Norway, imports of liquefied natural gas as well as its own reserves in the North Sea,” Minogue told the Business Post.

“Ireland is therefore better insulated from gas rationing than other European countries. What we are not insulated from is the unprecedented cost of natural gas. We think affordability is going to be a major issue this winter for Irish businesses.

“What we’re looking for from the government is the introduction of grant aid to businesses to offset the spike in energy prices. Recent changes to EU state aid rules allows for this and we’d be hoping to see significant supports for business,” he added.

Meanwhile, energy industry experts have again called on the government to publish its long-awaited review of Ireland’s energy system, which was first commissioned in 2019 by then minister Richard Bruton to assess the security of Ireland’s gas and electricity systems.

“Everyone is waiting on the review of Ireland’s security of energy supply to be published very soon by the government. There needs to be clarity for the energy sector,” Donal Kissane, a chartered engineer and a former chair of Engineers Ireland’s energy, environment and climate action division, said.

“The Commission for Regulation of Utilities (CRU) has highlighted on two occasions to the joint Oireachtas committee on energy and climate action that Ireland needs to diversify its energy supply sources and that the government should look at the construction of an LNG terminal in the country.

“I think all energy professionals would agree with that analysis. We need to have a diversified gas supply portfolio because gas is the cleanest transition fuel, and we will be using it for many years to come,” he added.

In the event of a worst case scenario where gas rationing was required in Ireland, Kissane said the British gas operator would dictate how energy is rationed in Ireland, given our reliance on Britain for gas supplies.

“Large industrial users will be first to come off the gas grid in the event of an emergency. In many cases, most of those firms will have an oil-fired back-up supply of energy. However, a certain amount of gas-fired power plants will need to stay connected to the gas grid to keep the electricity system operational,” he said.

“The very last sector to come off the gas grid in an emergency situation will be residential users who are protected customers and need gas for home heating. Ireland doesn’t really have a heavy industrial sector that is energy intensive, but we do have a lot of light industry firms, such as food processors, pharmaceutical and life sciences companies. Many of these businesses will have back-up power sources for on-site generation in the event of an emergency,” Kissane added.

Source: Business Post

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