Ireland has a competitiveness problem, and planned outlays on electricity infrastructure will make things worse in the coming years, writes Nick Mulcahy.

Every year, the Institute for Management Development (IMD), the business school, ranks global economies for their competitive business environment.

In the IMD’s latest league table, Ireland has dropped three places to number seven, a decline of five spots in just two years.

On the Basic Infrastructure metric, Ireland has dropped from 38th in 2024 to 44th place in 2025.

The IMD report also canvasses the views of business leaders, and their sentiment on Energy Infrastructure is down 16 places year-on-year.

This reflects frustration surrounding the inability of ESB Networks and EirGrid to provide the electricity services that the construction and industry sectors demand.

In a recent analysis, the National Competitiveness and Productivity Council (NCPC) noted that Ireland has the highest electricity costs in Europe for non-domestic consumers and considerably higher rates compared with the US and China.

Business electricity costs in Ireland are 56 per cent above the EU average, according to the NCPC, a reality that it described as “a real competitiveness challenge”.

Around 30 per cent of the cost of electricity is accounted for by network charges, which relate to cost recovery for infrastructure investment, maintenance and operation.

Electricity cost is also inflated by the Public Service Obligation (PSO) Levy, a subsidy for renewable electricity generation.

The PSO has extracted €1.9bn from electricity users over the past decade, with another €160m pencilled in for 2026.

Consumers pay dearly for green electricity in other ways too.

The NCPC analysis found that the variability associated with wind energy production in the tariff year 2024-25 added €570m to the overall price of consumed electricity.

This was partly due to inadequate electricity grid infrastructure, and most of the financial burden of improving the grid will be borne by consumers.

Though there is private competition for the supply of electricity, the distribution and the transmission system is a state monopoly under the control of ESB Networks and its spinout EirGrid.

Neither enterprise can be described as lean and mean.

Across the ESB group of companies, the average payroll cost for 9,600 employees in 2024 was €101,000.

The corresponding figure for EirGrid’s 610 staff was €104,000.

In addition to remitting huge amounts of income taxes and social insurance charges to the exchequer, last year ESB paid the government a €317m dividend, with EirGrid coughing up €50m this year.

This largesse is sourced from the electricity consumer, and in the latest count 301,000 households are in arrears on their electricity bills, along with 27,400 small firms.

ESB Networks and EirGrid want to double their network charges in the coming years.

For the 2026 to 2030 period, the Commission for Regulation of Utilities (CRU) has provisionally sanctioned €14bn to €18bn in network costs to be recovered from consumers compared with €7.5bn in the previous five year-period.

For the owner of a bar or shop, this would mean their annual network charge increasing from €3,400 to up to €4,100, and for a hotel operator the charge would rise from €92,000 to up to €108,000.

The CRU announced these increases a couple of weeks before the updated National Development Plan pledged €3.5bn of government funding for ESB Networks and EirGrid.

Businesses will be hoping that the CRU takes this fresh investment into account when finalising its 2026-2030 ESB/EirGrid price determination in mid-September.

The government’s appetite or otherwise to rein in ever escalating power charges to business will be evident in the upcoming Action Plan of Competitiveness and Productivity.

Should the regulator just treat the NDP funding as a bonus for the state monopolies, then the action plan might as well be tossed in the bin.