The Public Service Obligation Levy (PSO) is set to make a return to Irish business energy electricity bills starting from October 2024. After a year where the PSO was set to zero due to soaring wholesale electricity prices, businesses across Ireland will now face an increased charge as the PSO Levy is reintroduced. This article explores the changes for the 2024/25 period, explains its purpose, and outlines the critical implications for business energy costs.
What is the Public Service Obligation Levy (PSO)?
The PSO Levy is a government-imposed charge applied to all electricity consumers in Ireland. It plays a pivotal role in funding renewable energy initiatives such as wind and solar projects, which help Ireland meet its ambitious climate goals and reduce reliance on fossil fuels. The Commission for Regulation of Utilities (CRU) sets the PSO Levy annually, based on the amount needed to support renewable energy generation.
For the 2024/25 period, the total levy is set at €251.79 million, marking a return after being zeroed out the previous year. The funds will continue to support key schemes such as the Renewable Energy Feed-In Tariff (REFIT) and the Renewable Electricity Support Scheme (RESS), both crucial in driving Ireland’s green energy transition.
How much will Public Service Obligation Levy add to business energy bills?
For businesses, the PSO Levy will add a fixed cost to electricity bills, depending on the size of the business:
- Small Business Energy Users: (with less than 30 kVA capacity) will pay a monthly charge of €12.91.
- Medium and Large Business Energy Users: will be charged €1.57 per kVA of capacity.
These charges mark a new cost for businesses after a year’s relief, making it essential to budget for the increased energy overheads in 2024/25.
Why is the Public Service Obligation Levy Increasing?
The return of the PSO Levy in 2024/25 follows significant shifts in the energy market. Here are three key reasons for its increase:
- Falling Wholesale Electricity Prices: The PSO operates on an inverse relationship with wholesale electricity prices. In 2023/24, high prices reduced the need for PSO support. However, forecasts for 2024/25 indicate lower wholesale electricity prices, leading to a higher PSO Levy to maintain renewable energy funding.
- R-Factor Adjustment: The CRU applies a reconciliation mechanism known as the R-Factor to correct for differences between forecasted and actual electricity prices. For 2022/23, overpayments into the PSO fund were identified, which are being carried forward into 2024/25, contributing to the levy increase.
- Continued Support for Renewable Energy: The PSO Levy is essential in supporting renewable energy projects under REFIT and RESS, enabling Ireland to progress towards its 2030 carbon reduction targets. The levy ensures that renewable energy generators receive the financial support they need.
Impact on Ireland’s Renewable Energy Goals
As Ireland pushes towards a low-carbon future, the PSO Levy plays a crucial role in ensuring continued support for renewable energy projects. In 2023, 42% of Ireland’s electricity came from renewable sources, and the 2024/25 PSO will support over 4,459 MW of renewable energy capacity. Wind energy remains a key contributor to the national grid, further stabilising energy supply and reducing reliance on fossil fuels.
Business Energy Implications and How to Manage Costs
The return of the PSO Levy means a direct increase in electricity costs for businesses. However, companies can take proactive steps to manage the impact:
- Explore Energy Audits: Reducing consumption through energy efficiency measures can offset the increase in fixed charges. Consider upgrades like LED lighting and energy monitoring systems. Our high quality Business Energy Audits can reduce your consumption, resulting in lower energy costs.
- Review Your Energy Strategy: As wholesale electricity prices remain volatile, this could present an opportunity to switch to a more competitive tariff. Our team at UtilityWorks can help you find the best procurement strategy tailored to your needs. Our Utility Health Check ensures you compare the whole market, with complete transparency, identifying opportunities to reduce energy costs immediately.
Business Energy Savings with UtilityWorks
At UtilityWorks, we believe in empowering businesses with tailored solutions that reduce costs and support sustainability goals. Our Utility Health Check provides an in-depth, transparent review of your current energy usage and bills, helping you uncover potential savings and optimise your energy strategy.
Contact us today for a free consultation to learn how the PSO Levy will affect your business and discover ways to offset the costs through smarter energy procurement and low-carbon solutions.
