Ireland’s Energy System: The Historical Case for Hope in Climate Action

Administering Dreams

The Ireland of the 1920s presented unlikely circumstances for ambitious national projects of any kind. After three years of guerrilla warfare against the British Crown forces, a form of independence had been achieved by 1922. The young Irish Free State government of freedom fighters and idealists was to set out on its own with little source of economic development beyond the sale of cattle to Britain and with much of its populace in extreme poverty.

In 1921, the Anglo-Irish Treaty was signed, giving independence to twenty six counties and leaving the six counties in the northeast of Ireland under British rule. The signing of the Treaty caused a split in the founding Sinn Féin party between those opposing and supporting the Treaty. This sparked a bitter civil war from June 1922 to May 1923 that has marked Irish politics for a century. The pro-Treaty element formed Cumann na nGaedheal, today the center-right (Christian Democrat) party Fine Gael. A group of republicans led by Éamon de Valera broke away from Sinn Féin in 1926 and formed Fianna Fáil, ³ in protest at the Oath of Allegiance to the British Crown, which all members of Dáil Éireann (the Irish Parliament) were obliged to take. The Cumann na nGaedheal party was in office from 1922 to 1932. Laissez-faire economic and commercial orthodoxies of the 1920s, inherited from the British administration, and a reinstated civil service were largely the global order of the day.

One hundred years ago, the two civil war parties . . . were united in their commitment to a state-owned energy system with an objective of universal access, public good, and public value.

However, the young state took on a number of major interventions in the economy. Most notable were the Land Commission and the creation of Ireland’s state energy company, the ESB, and its primary power source, the Ardnacrusha Hydroelectric Power Station on the Shannon River—also known as the “Shannon Scheme.” ⁴

To deliver Ardnacrusha’s energy to the public, in 1927 the government established its first Irish state company, the ESB, through the Electricity (Supply) Act, 1927. This was to be the first national electricity service in the world, with full responsibility for the generation, transmission, distribution, and marketing of electricity. ⁵ From its beginnings, the aim of the ESB was not-for-profit, universal, and affordable access to electricity; “strong on technical expertise, with set targets and with the muscle, dynamism and freedom to achieve these targets.” ⁶ Attempts had been made to attract foreign investors, particularly from the United States, but “most of the big corporations objected to the government’s stipulation that unprofitable rural lines might have to be built without any guaranteed government subsidy.” ⁷ The Irish electricity industry had been in existence for forty years, yet the vast majority of the population had been left in darkness and drudgery. As a result of these failings, the fledgling Department of Industry and Commerce concluded that confining the ESB to mere distribution of the energy from the Shannon Scheme was likely to place the whole enterprise in “immediate jeopardy.” ⁸ The government therefore nationalized what was a piecemeal mess of three hundred expensive, “badly run,” inefficient private and local authority undertakings. ⁹ The critique and backlash from moneyed interests were significant, with one newspaper describing the program as “the first fruits of Bolshevism in this country.” ¹⁰

Yet, the Shannon Scheme, built with the assistance of the German engineers from Siemens-Schuckert, was completed on time and within the contract price of IR£5million (monumental for the time), providing 100 percent of Ireland’s electricity needs in the 1930s at a mere 1d (penny) per unit compared to 5d (pence) from previous suppliers. ¹¹ It is hard to overstate the importance of the project in building Ireland’s sense of self-confidence. The Shannon Scheme and the successful efficient delivery of electricity by the ESB were a triumph for the new Irish state. ¹² The international, national, and local expertise created during the project poured into the ESB, its plans for Ardnacrusha still used internationally as a blueprint for hydroelectric plant development. ¹³ To quote W.M. Harland of the Financial Times,

For half a century the country under the British regime toyed with the suggestion of harnessing the Shannon. The British are a hard-headed and practical folk, but they jibbed at such a venture. Then the Free State came into being, and ardent untried administrators, remembering that they had always been accused of being dreamers, seized on this chance of showing what they can do . . . . they have had thrown on their shoulders the not easy task of breaking what is in reality an enormous inferiority complex and the Shannon Scheme is one—and probably the most vital—of their methods of doing it . . . The faith of the Free State in its nation-wide hydro-electric venture is as steadfast as a religious belief.” ¹⁴

In the 1930s—despite dire financial straits, a trade war with Britain, and the outbreak of the Second World War—the young state plowed ahead with its plans to deliver universal and affordable access to electricity through a Rural Electrification Scheme (RES), modeled on U.S. President Franklin D. Roosevelt’s 1935 Rural Electrification Administration under the New Deal. In addition to lighting homes, the aim was to modernize Irish industry and business, including agriculture where electricity made farms more productive. The RES was accompanied by a participative community approach to educate the public as to the benefits of electricity. Many of the ardent proponents of the RES had grown up in small, dark country homes where churning butter, collecting water from wells, and laundry were all done by hand. ¹⁵ It was hard, laborious “women’s work” which saw daughters emigrating en masse rather than face lives similar to that of their mothers. ¹⁶ The RES commenced in 1946 aiming to supply only 69 percent of rural premises—a target achieved in 1961. ¹⁷ By 1975, 99 percent of all homes in the country had an electricity supply. ¹⁸ This process lasted thirty years, costing IR£140 million. It was funded in part by a direct state grant, but primarily through solidarity, with urban areas subsidizing access and affordability for uneconomic rural areas.

. . . the Shannon Scheme . . . was completed on time and within the contract price of IR£5million . . ., providing 100 percent of Ireland’s electricity needs in the 1930s at a mere 1d per unit. . .

By the 1990s, the ESB was a world-class energy company, highly efficient at low cost due to seventy years of price controls. ¹⁹ Key to the success of the Shannon Scheme, the RES, the ESB, and, later, peat-based electricity generation under Bord na Móna was their “ardent untried administrators, remembering that they had always been accused of being dreamers.” It is argued here that these successes were due to the Irish state’s long-term economic planning, belief in state leadership, experimentation and enterprise, and, most importantly, the steadfast underpinning of the energy system (and other aspects of the economy) with a not-for-profit public good and public value mandate. ²⁰ This enabled state ownership without harsh bureaucratic oversight. ²¹

The Present Day

In 1999, some twenty years after the completion of the RES, the then Minister for Public Enterprise Mary O’Rourke introduced the “Electricity Regulation Bill 1998” which opened up 28 percent of the Irish electricity market to competition. In introducing the bill, the then Minister O’Rourke stated that “It will herald a new dawn for Ireland as we face into the next century.” ²² She was not wrong.

This bill came on the back of a wave of liberalization and privatization of energy systems, starting in 1982 with the privatization of Chile’s energy system under the Pinochet dictatorship. Beginning in 1996 with the First Electricity Directive, ²³ the European Commission introduced a series of legislative interventions which “unbundled” national electricity systems (including generation, transmission, distribution, and supply) to introduce competition to the profitable parts of generation and supply. In the south of Ireland, transmission networks remained in public ownership, largely due to trade union opposition to privatization. The reforms were based on the belief that effective competition and a more integrated European energy market would naturally reduce energy costs, increase freedom of choice for consumers, and remove barriers to intra-Community trade. ²⁴

In the 1930s—despite dire financial straits, a trade war with Britain, and the outbreak of the Second World War—the young state plowed ahead with its plans to deliver universal and affordable access to electricity . . .

For the Irish markets, North and South, ²⁵ this policy has failed. Privatization was, in large part, the transfer of publicly funded generation and supply assets to the private sector. The ESB was forced to artificially increase its prices to attract competitors into a new energy market that the state spent millions in creating. ²⁶ When the ESB’s statutory requirement to operate on a not-for-profit and break-even basis was repealed in 2001, electricity prices skyrocketed ²⁷ and energy poverty increased, leading to an annual 2,800 excess of cold-related deaths and a sharp spike in disconnections. ²⁸ Pay and conditions for staff were cut, with significant impacts on rural areas such as Bord na Móna in the Midlands. New private entrants into the generation market offer worse pay and working conditions overall and refuse to recognize trade unions. ²⁹ At a time of rapid economic growth during Ireland’s “Celtic Tiger” period from the mid-1990s to late 2000s, the ESB was required to significantly reduce its control of electricity generation, risking power cuts and electricity blackouts in 2001 and 2002, with increased risk ever since. ³⁰ Energy efficiency increasingly became the responsibility of individuals and households, rather than the duty of the state in managing its energy and housing systems. ³¹ Despite already significant energy price increases, a carbon tax of €10 per ton was introduced to encourage consumer energy efficiency.

When it came to policy concerning renewable energy, things were even stranger. In 2001, the Irish government committed to the delivery of 13.2 percent of electricity from renewable energy sources by 2010. ³² Rather than drawing on the experience of its earlier highly successful Shannon and Rural Electrification Schemes to meet decarbonization goals, the Irish State, backed by the European Commission, embarked on an inversion of that process.

[Due to privatization reforms] the Electricity Supply Board was forced to artificially increase its prices to attract competitors into a new energy market that the State spent millions in creating.

Efforts to meet decarbonization targets under the Kyoto Protocol of the United Nations Framework Convention on Climate Change were shoehorned into the existing European Commission policy of liberalization and privatization of member state energy systems. Popular economic thinking was that inefficient, outdated, authoritarian state incumbents—such as the ESB—were standing in the way of new renewable energy “disruptors,” assumed to be private companies and investment funds. ³³ In reality, liberalization and privatization failed to attract the necessary zeal from private industry, driven as they were by short-term profit, not public value or long-term social or ecological benefit. This led to “incentivizing” private actors into the market by bypassing proper planning procedures, ³⁴ using significant state subsidies and supports such as the Renewable Energy Feed-in Tariff (REFIT) which provided a guaranteed set fifteen-year minimum price per unit of electricity exported for the grid. ³⁵ These subsidies to largely multinational companies and investment funds were financed through a flat Public Service Obligation (PSO) levy charged to all households, regardless of their ability to pay. Infrastructure development, including pylons and related grid upgrades for both fossil fuels and renewables, were no longer funded through capital investment, but through flat taxes on households. These were regressive policies that exacerbated energy poverty ³⁶ and disconnection rates.

New private entrants into the generation market offer worse pay and working conditions overall and refuse to recognize trade unions.

A major public backlash arose against the changes in the energy system, including local opposition to wind farms and grid infrastructure developments, clashes with biodiversity objectives under nature conservation laws, significant protests, and numerous court cases on planning procedure and community participation. Public fears of new technology had arisen before during the ESB’s RES, but nothing on this scale or with this intensity of anger. The sense was that peripheral rural regions, after decades of underinvestment and abandonment, were being used as “sacrifice zones” ³⁷ by the state to benefit multinational companies and investors that would take power to Dublin and the United Kingdom. There was also little direct community benefit from these renewable energy schemes, unlike in other European countries. ³⁸

Despite calling for “community energy” or “energy democracy,” mainstream narratives from climate campaigns also invert the solidaristic principles that underpinned the RES. While criticizing the lack of community engagement and support for small-scale local projects, mainstream climate narratives have largely equated public value with E.U. renewable energy targets, without fundamentally questioning the manner in which they are accomplished. In Ireland, climate campaigners have focused on securing the shift from fossil fuels to renewables, mainly wind-based electricity production, not the ownership and control of the system, nor the distributive justice of who carries the financial cost of the shift. Irish community energy projects are few in number, but it remains notable that not a single project—planned or developed—provides energy at a low or cross-subsidized rate to local people in energy poverty. The potentially transformative, local wealth-building vision of community energy is reduced to a demand that people with private homes and disposable income can access the electricity grid to consume, produce, and be publicly subsidized for energy on the same terms as multinational private interests.

. . . [L]iberalization and privatization failed to attract the necessary zeal from private industry, driven as they were by short-term profit, not public value or long-term social or ecological benefit.

While local renewable energy projects are beset by difficulties in planning and achieving access to the grid, it remains that the piecemeal “community energy” alternative offered is not adequate to the challenge of decarbonizing Ireland’s energy system and risks providing cover for a subsidized privatization of the energy system. This is of particular concern considering the projected 31 percent increase in energy demand by 2027 due to data centers, which are set to be fueled largely by fossil gas, including U.S. fracked and liquefied natural gas (LNG) gas. ³⁹ Rather than trying to shoehorn itself into the European Commission’s increasingly financialized framework for energy, the aim of community energy is better served by emulating the founding mandate of Ireland’s national energy system to provide universal, affordable access for all, alongside community development and rural employment. To ensure a just transition, energy must be seen as a human right (like education or health), not reduced to a commodity.

Significant time and effort has been spent on an ideological project of liberalizing and privatizing the energy system, rather than taking decarbonization or energy poverty seriously. It is no accident that the one area where Ireland has made serious gains in climate action is in integrating renewable energy into the transmission and distribution networks—systems wholly owned by the state bodies EirGrid and ESB Networks. It is no accident that the achievement of Ireland’s renewable electricity target of 40 percent has been led by Irish semi-state bodies such as the ESB and Coillte (the state forestry company) and achieved through significant public subsidy. It is also unsurprising that it was a state-owned commercial company, Bord na Móna, which commissioned Ireland’s first commercial wind farm in Bellacorick, County Mayo in 1992 to service the ESB. It is also no accident that energy efficiency—the “first renewable fuel”—is the only one of the three E.U. climate Directives and Regulation that has always been a voluntary target. ⁴⁰

Making Our Way Back

The Irish government is set to miss every E.U. climate commitment, including its 2020 renewable energy targets, apart from potentially the target of 40 percent renewable electricity by 2020. ⁴¹ If Ireland does reach this 40 percent target, it will have been largely due to the leadership of Irish semi-state bodies, the publicly funded REFIT subsidy, and the ESB-owned coal station Moneypoint being out of action for several months in 2020. ⁴² Ireland’s reliance on fossil fuels for energy production “is the principal source of emissions in Ireland” at 60.5 percent of total emissions. ⁴³ The drive of the energy system toward profit rather than public value and the inability of the energy system to meet the challenges of decarbonization are inextricably linked. For more than twenty years after the “new dawn” of the Electricity Regulation Bill 1998, proponents of privatization and liberalization have repeated the mantra that “the market will stabilize,” prices will fall, efficiency will increase, and renewable energy targets will be delivered. ⁴⁴ This never happened. After thirty years of renewable energy and climate directives, Ireland’s energy system is now one of the most heavily reliant on fossil fuels in Europe. Ireland has become one of a number of E.U. member state energy markets that are “hotbeds for consumer-damaging market manipulation and abuse,” ⁴⁵ few of which have achieved their decarbonization targets. In 2019, Ireland’s energy prices were 11 percent above the E.U. average—in an already overpriced E.U. energy system. ⁴⁶ Prices fluctuate rapidly, increasing by 7-11 percent in just six months in 2019, ⁴⁷ and energy poverty (intermittently recorded) appears to be as high, if not higher, than ever. ⁴⁸ Energy poverty protections in the new Electricity Directive prevent price controls “regardless of whether the Member State concerned has a significant number of households in energy poverty.” ⁴⁹ Instead, states must subsidize high profits with their social welfare systems ⁵⁰ —another transfer of wealth from the public to private interests. No industrial (MW) wind turbines or solar panels are manufactured in Ireland. Apprenticeships, or third-level courses, in energy-efficient housing or carbon sequestration in peatland or forestry are few and far between. ⁵¹

Ireland now faces an enormous challenge of decarbonizing its energy system when the ESB is no longer the dominant energy generation provider and its public good/public value mandate has been removed, leading to greater investment in fossil fuels despite environmental and human rights impacts. ⁵² The ESB has been forced to compete with multinationals in a global energy system based on profit and extraction. Arguably, this has led to an increasingly financialized energy system controlled by the short-term profit priorities of international investors, a new maritime enclosure movement as private operators dominate offshore wind, ⁵³ a 31 percent jump in fossil and fracked gas-powered electricity demand to facilitate data centers for tech companies that pay little to no tax, and the closure of state-owned peat and coal-fired power plants that require a just transition for over two thousand workers in the Midlands, where unemployment is already the highest in the country. ⁵⁴ In the face of these challenges, the state’s role is reduced to “better targeted” public subsidies, undermining proper planning procedures and public participation, and shifting carbon taxes around to prevent the worst excesses of energy poverty.

There is hope. Climate policy and scientific experts, from mainstream British economist Nicholas Stern to the Intergovernmental Panel on Climate Change, have long been clear that state-led action is fundamental to delivering the fast-paced climate action required. The Covid-19 pandemic has brought a renewed faith in state-led investment and industrial planning. The Irish state think-tank, the National Economic and Social Council, has published a report that comes to similar conclusions. ⁵⁵ In a rare move by the President of Ireland, Michael D. Higgins, this report was endorsed as the contemporary counterpart of the Whitaker Report, the 1958 First Programme for Economic Expansion which delivered a seismic shift in Ireland’s economic policy. ⁵⁶ The European Green Deal, in rhetoric at least, has committed to greater action on climate in the context of a just transition and a reorientation of investment objectives. Both the European Green Deal and Ireland’s 2020 Programme for Government commit to new indicators for prosperity beyond GNI (gross national income) and GDP (gross domestic product). ⁵⁷

It is time to explore whether re-nationalization of Ireland’s energy system can remove the restrictions of the profit motive.

Ireland created the first national energy system aimed at bringing light and prosperity to its people. Energy was delivered to the most remote and inaccessible parts of the country, regardless of the cost or difficulty in delivering the service. Still today, as we are battered by increased storms due to climate change, it is the name of the ESB we hear on the radio fixing overhead lines and our network in crisis. It is time to explore whether re-nationalization of Ireland’s energy system can remove the restrictions of the profit motive. Government can then use the coherence, efficiency, and track record of the ESB to deliver a direct, democratic, fast-paced, and system-wide shift. Job losses in the Midlands and County Clare could be replaced with a vibrant, good jobs economy focused first on energy efficiency and restoring Ireland’s natural environment to store carbon in thousands of acres of bogland, alongside renewable energy manufacturing and generation. Let’s take our chance to choose anew, to choose a just transition.