Analysis: Through our government we are all signatories of the Paris Climate Agreement and are part owners in state-owned energy utilities. Therefore, we are all financially liable to the failure of the state to work cohesively towards fulfilling our commitments.

The Paris Climate Agreement is needed to save our environment and human lives. Our state-owned energy utilities may incur significant financial risk, which could have negative impacts for citizens to fulfil such an agreement and action is needed.

The Paris Climate Agreement aims to eliminate or offset carbon emission by 2050, this creates a need for close to carbon free electricity in Ireland by 2030, and heat by 2050

To provide electricity and heat to our homes and businesses, we rely on a number of companies known as energy utilities, for example the ESB Group and Gas Networks Ireland. These utilities and the fossil fuel-dependent infrastructure they operate are largely state owned, meaning that by proxy they are owned by Irish citizens. 

State-owned utilities are trying to align their services with the Paris Climate Agreement by investing in clean energy. However, the financial risks to their existing infrastructure and the impacts on energy prices you pay as customers are uncertain.

The solution is to successfully phase out or repurpose fossil-fuel dependent infrastructure in a low risk and timely manner, which presents a challenge in itself.

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Clean energy can be delivered in a number of ways. The electricity system through ambitious investments in renewable electricity, such as wind and solar, is expected to create a clean source of electricity.

A similar concept for the gas network is the blending of renewable or green gas (gaseous fuel from the breakdown of organic material), a substitute to natural gas, into the natural gas network. The abundance of green gas is limited and may only contribute to substituting about a quarter of current gas demand.

Reducing fossil fuel use in power generation will equate to premature closers of fossil-fuel power plants. The financial cost of doing this is large but pales in comparison to the financial impacts of climate change itself. A strategy to reduce fossil fuel use in electricity production and make our gas supply green, while maintaining the financial viability of these utilities and keeping energy prices consistent with today’s levels isn’t clear.

In 2017, half of the electricity produced in Ireland came from gas power plants all of which are connected to the gas network. In the context of climate policy, our gas network supports our electricity system, and these should be thought about in terms of one large piece of infrastructure rather than in isolation. What happens to one directly impacts the other.

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The costs for the gas network are largely fixed and spread out over a large number of customers. If the number of gas customers shrink, the cost has to be spread over a smaller group of people.

Earlier this year research by UCC, under the same principle, suggested that a lower use of gas power plants to generate electricity in the future could increase the costs to customers transporting gas via the network to their homes for heating.

Additionally, a fall in the use of the number of customers using gas as a source of heat in their homes could increase costs to gas power plants to transport gas to their power plants for electricity generation, reducing the profitability of gas power plants and potentially increasing electricity prices. A policy of banning the installation of more efficient gas boilers, for example, may catalyse this.

In the absence of speculative technologies such as carbon capture and storage, an expensive filter that captures and stores emission from the power plant, the majority of fossil fuel-based sources of electricity will need to be shut down, primarily gas power plants, over the course of the next decade.

On the one hand, this will be a loss of revenue for the gas network and increases the costs of use to other customers who may switch to alternative sources, creating a vicious cycle. On the other, gas power plants have long term debts that exceed their possible operational life.

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In this scenario, utilities may have to default on their debts or a receive a bailout, both of which would make it incredibly difficult to raise financing for continued investments in renewables, jeopardising our chances of reaching any climate related target. Unfortunately, this is already happening with the ESB Group suffering an asset value write down of €276 million last year on gas power plants alone.

Through our government we are all signatories of the Paris Climate Agreement and are part owners in state-owned energy utilities. As citizens we are all financially liable to the failure of the state to work cohesively towards fulfilling our commitments to this agreement.

Our most recent experience of this has been with our banking sector and the pressure from Europe and financial markets to manage it, the consequences of which were felt in every home and business in Ireland.

The first steps are to limit fossil fuel investment and phase out the fossil fuel assets and related debt that currently exists, in a way that mitigates financial risk and energy prices.

Phasing out fossil-fuel infrastructure won’t happen immediately but a plan would be useful to guide investment in energy infrastructure and send clear signals to capital markets. Such plans exist for the deployment of renewables but are sparse for phasing out what currently exists.

The views expressed here are those of the author and do not represent or reflect the views of RTÉ.