Energy prices in Ireland are higher than we would wish. This is driven by various factors, including reliance on gas-fired plants to generate electricity, dispersed population leading to higher network charges, small market size and lack of scale in generation and temporary pass-through effects from wholesale to retail markets.
The Programme for Government states our ambition to achieve energy independence by harnessing our untapped renewable energy resources and provides a roadmap for increasing renewable generation capacity. The ambition of this Government is to rapidly expand our renewable energy capacity which includes scaling up wind, solar, and grid infrastructure, supported by streamlined planning and regulatory processes.
The European Commission suite of legislative proposals to reform the electricity market design (EMD) was adopted in June 2024. It will help stabilise long term markets, speed up the deployment of renewable, fossil-free energy sources, offer more affordable electricity to EU citizens through new market activities, ensure protection of vulnerable consumers, and enhance industrial competitiveness.
High energy prices create pressure on households and harm Ireland’s economic competitiveness. Earlier this year, I established the National Energy Affordability Taskforce to examine cost drivers across our energy system. I am pleased to see some of its initial recommendations adopted under the budget.
Firstly, the budget will see a long-term reduction in the VAT rate applicable to gas and electricity bill, reducing this from 13.5% down to 9%. This measure will remain in place until 31 December 2030, at an annual cost of €254 million. This has effectively created a tax reduction of more than €1.25 billion and is worth an average of €100 per year to a household using gas and electricity.
Secondly, retrofitting remains one of the most impactful measures a household can take to reduce energy bills. Budget 2026 provides the largest ever budget for retrofitting with an allocation of €558 million. This will support up to 65,000 home upgrades. This includes the Warmer Homes Scheme which last year provided fully-funded deep retrofits to almost 8,000 homes.
With an €89 million increase on last year, this means that more funding than ever will be available to make people’s homes warmer, healthier, more comfortable and less expensive to heat.
These retrofits will make a significant difference to households, and are supported by ringfenced funding from the carbon tax. Recent figures suggest that a household can save up to €1,100 in energy costs by undertaking deep retrofitting such as attic, floor and wall insulation and high efficiency glazing.
Furthermore, under Budget 26 Government has enhanced targeted energy affordability measures through our Social Protection System. This budget will see the weekly rate of Fuel Allowance increase by €5 to €38 per week. This payment currently supports 410,000 households and under Budget 2026 it will be expanded to all households in receipt of the Working Family Payment such that 460,000 families will benefit from this support.