A ‘flexibility gap’ could derail the energy transition in Ireland unless more is done to attract private investment

  • Report highlights that in 2022 just 15% of all new vehicle registrations were electric, amounting to 1.4% of Ireland’s vehicles in total.
  • While national smart meter rollout has passed 50%, heat pump penetration is around 3%.
  • More than 60% of Ireland’s energy still comes from fossil fuels. Ireland’s change in renewable output from 2021 to 2022 was just 10%.
  • Innovation funding and activity is seen as more limited for new entrants than for incumbents.

A new study has highlighted one of the major challenges that some of Europe’s biggest economies face in achieving their 2030 renewable energy targets, and it is all to do with ‘the flexibility gap’. Governments must respond with policies that will deliver fair, transparent, and easily accessible markets needed to attract private investments in demand-side flexibility.

In 2022, Ireland’s annual renewable production (mainly wind) represented 38% of annual consumption. By 2030, Eirgrid forecasts a 33% increase in consumption, largely driven by data centre demand. Ireland’s Climate Action Plan has targeted 80% renewables output for 2030, which could require an increase wind and solar output of 23 TWh.

There is a high political and public consensus on the need for the energy transition, but the costs involved are not well communicated, creating doubt that they are properly understood. High inflation and cost of living concerns are a higher political and public priority than the energy transition, impacting confidence in policies to implement the transition.

As coal and gas generation are phased out, national grids must balance the intermittency of variable renewable generation from assets such as commercial windfarms with their country’s minute-by-minute demands for energy. Flexibility is essential to stabilize a high-renewable grid and the only way that countries can achieve high levels of flexibility is by encouraging investment in demand-side response capabilities such as energy storage. Open markets for flexibility are a critical requirement for encouraging such investment.

The flexibility gap is highlighted in the 2023 Energy Transition Readiness Index (ETRI) produced by the Association for Renewable Energy and Clean Technology (REA) which this year is co-sponsored by Eaton, the global intelligent power management company, and Foresight Group, the sustainability-led infrastructure and private equity investment manager.

The study on which the index is based compares the readiness of 14 national electricity markets to make the transition away from fossil fuels and, amongst other thing, it explores the flexibility gap between each country’s target for variable renewable energy production by 2030, and the amount of associated flexibility the country would need by then.

On this basis, Germany and the UK face the biggest flexibility gap by 2030, with Ireland, Denmark, Greece, the Netherlands, and Spain also challenged. Only Norway, Finland, and Sweden look set to bridge the gap with ease – their gap is smaller, partly because they have access to lots of hydropower but also because they have well-established flexibility markets.

France and Italy face a smaller gap than some neighbouring countries but nevertheless must do more to attract the investments in flexibility they will need by 2030. Switzerland faces a relatively small gap thanks to high levels of flexible hydropower, but its regional governance structure means poor coordination of policies to deliver all the flexibility needed. Poland is in the early stages of energy transition, with strong ambitions but facing challenges in funding the necessary investments to improve grid access for flexibility providers.

There is much good news for Europe in this detailed and fascinating survey, with the index also encompassing sub-rankings for the socio-economic and technological factors that support or impede investments in the energy transition. Increasing the level of support for enabling technologies, such as EV charging infrastructure and smart meter rollout is one of the ways that countries can boost flexibility, and therefore help to close the flexibility gap, and there is evidence that some countries are seizing this opportunity.

Both Germany and the UK demonstrate the greatest improvements in ‘investor attractiveness’ since the annual survey started in 2019, showing that with the right policy environments both countries have the potential to attract investment in the energy transition, bridge the flexibility gap, and deliver high-renewable grids.

Phil Kane, Country Manager for Eaton Ireland, said: “Business enthusiasm for the energy transition is growing, spurred on by concerns about carbon emissions, energy security and price volatility. Governments must respond to this with policies that will deliver the fair, transparent, and easily accessible markets needed to attract private investments in demand-side flexibility and make the energy transition accessible and affordable to all. Stability and predictability will boost investor confidence in projects that can often have quite lengthy payback periods.”