The recent unveiling of energy and sustainability initiatives has triggered a diverse range of reactions. Notably, Irish households can anticipate three additional energy bill credits valued at €150 each for the winter season. Furthermore, individuals who sell surplus electricity back to the grid will enjoy tax breaks. Schools will also benefit from the extension of the zero VAT rate on solar panels.

Postponed Carbon Tax:

An increase in the carbon tax, resulting in a 3 cent price hike for petrol and diesel, was introduced on Wednesday. However, the planned excise increases, set for the end of the month (8 cents on petrol and 6 cents on diesel), have been deferred and will be reintroduced gradually in April and August of 2024.

Home Retrofitting:

Significant funding of €380 million has been allocated for home retrofitting, marking a €24 million increase from the previous year. Additional support from the European Regional Development Fund will contribute to this effort. The exact number of homes that will undergo retrofitting in the coming year will be determined in the coming weeks. Importantly, the retrofitting fund is financed entirely by the carbon tax.

Microgeneration and VAT on Solar Panels:

Commencing on January 1, the tax exemption for household income earned from selling surplus electricity back to the national grid will be doubled. In addition, the zero percent VAT rate for solar equipment will now encompass schools, in addition to residential properties.

Mixed Reception:

The various measures have garnered a mixed response from industry, environmental, consumer, and social justice groups. Some consider the budget underwhelming, citing that households are entitled to €450 in energy credits, down from the €600 granted in the previous year’s budget. Despite a decrease in wholesale electricity prices, the high cost of electricity in Ireland remains a concern.

On the other hand, supporters of solar energy express a blend of opinions. They commend the government for supporting homeowners in adopting rooftop solar panels through new low-interest loan schemes and tax incentives for surplus solar electricity sales. The extension of the zero VAT rate to solar equipment for schools is also seen as a positive step.

Although REDII does not establish a mandatory target for Renewable Energy Sources in Heating (RES-H), Ireland’s National Energy and Climate Plan (NECP) for 2021-2030 outlines a target of 24% RES-H by 2030, contributing to the overall mandatory target of 34.1% renewable energy. REDII requires all Member States, including Ireland, to work toward increasing the share of renewable energy in heating and cooling by an indicative 1.1 percentage points annually during the periods 2021-2025 and 2026-2030.

In 2020, RES-H accounted for 6.3% of overall heat usage, but this figure decreased to 5.2% in 2021. The decrease is attributed to the transition from RED to REDII and the introduction of new sustainability and verification criteria for biomass fuels.

In 2021, about 79 ktoe (kilotonnes of oil equivalent) of heat was generated from biomass fuel (including solid biomass and biogas), which must meet REDII’s sustainability criteria to be counted toward RES-H and the overall renewable energy target. The lack of verification for this biomass fuel resulted in a 1.6 percentage point decrease in RES-H for 2021.

Solid biomass is the predominant source of renewable heat in Ireland, primarily driven by the increased use of wood waste in wood processing. The residential sector has seen a significant rise in the adoption of air source heat pumps, leading to increased use of renewable ambient energy.

Renewable energy plays a vital role in reducing carbon dioxide (CO₂) emissions. Substituting fossil fuels with zero-carbon renewable energy sources is essential for mitigating greenhouse gas emissions, such as CO₂. It also enhances energy security by decreasing reliance on imported fossil fuels.

Between 2005 and 2020, the amount of CO₂ emissions avoided through the use of renewable energy increased five-fold, reaching 6.6 million tonnes of CO₂ (MtCO2) avoided in 2020. This is equivalent to the CO₂ emissions of over half of all Irish homes. In 2021, an estimated 6.2 Mt CO₂ was avoided through the use of renewable energy, with wind energy contributing 4.0 Mt CO₂ in emissions reduction.

The success of renewable electricity is evident in the decarbonization of the electricity system and the increasing electrification of heat and transport, including electric vehicles and heat pumps. This transition to renewable electricity results in significant reductions in CO₂ emissions compared to fossil fuel alternatives, forming a crucial part of the strategy to decarbonize the energy system.

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