Ireland losing ground to Europe and US due to high energy costs, IDA says

Ken Foxe

The IDA said Ireland was losing ground to other EU countries and the United States because of the high cost of energy.

In a series of briefings for the government, the investment agency said strong security of power supply was “imperative” for enticing companies into Ireland.

It said the operating environment for foreign direct investment was becoming more difficult, more aggressive, and with a “relentless focus on competitiveness.”

The IDA briefing said that traditional drivers of investment like market access, tax, and talent were still important.

However, it added: “New drivers such as digital/green, subsidies/incentives, and friendly nation status make the environment more complex.

“Adding to the challenge for IDA in sustaining/winning investments are constraints to the carrying capacity of Ireland’s economy and utilities - which are causing significant delay, backlogs and reputation risks to winning new investments.”

The briefings were prepared last summer for the Department of the Environment as the investment agency warned Ireland’s financial position was heavily dependent on foreign direct investment (FDI).

They said any reduction in FDI would lead to a significant reduction in tax revenues.

It said energy prices needed to decrease and become much more competitive as Ireland looked to attract in semiconductor and life sciences investment.

One briefing said: “Ireland is not sufficiently competitive with most other EU locations or the US.”

It said a significant increase in electricity supply was urgently needed to meet a sizable growth in demand from data centres, and other sectors.

A separate briefing said uncertainty over connections to the national grid for data centres was “of concern.”

It said: “With respect to overall energy connection policy, there needs to be a transitional period for data centres (and enterprise in general) to achieve decarbonisation and net zero.”

The briefing said the government should look to tap into the expertise of data centre operators around opportunities for innovation.

The IDA also said there was a risk to Ireland’s offshore renewable energy industry which was “underpinned by the large data centre demand and potential demand.”

It added: “A slowdown or cessation in data centre investment could adversely affect the economics for offshore wind developers, which in turn could impact the country’s ambition and targets in renewable energy development and climate action.”