In this week’s NERI blog, NERI economist Paul Goldrick-Kelly and NERI intern Jonas Poulsen summarise the main findings of a new report examining potential transition risk factors in the electricity sector on the island of Ireland.
Continued record breaking temperatures have highlighted the urgency of efforts to curb emissions and limit the worst of climate breakdown. A key element of this race to net zero will be greening electricity generation. This won’t simply be important on its own terms – as the sector is a major emitter in its own right – but will be relevant for decarbonisation throughout the economy in areas like transport.
In this report, we examine this crucial sector across the island of Ireland. Green generation, and associated emissions declines, across this shared grid are key elements of climate action plans and carbon budgets in both jurisdictions. In both cases, the sector is meant to lead emissions reduction efforts.
The report proceeds in several stages. Firstly, we use the all-island capacity statement to map out key fossil fuel sites on the island of Ireland. We then examine employment in the sector as a whole, as well as comparative pay levels relative to other sectors in both the Republic and Northern Ireland. Finally, we use disaggregated data to identify regional sources of risk including concentration of employment in the electricity sector, regional pay as well as other income and deprivation statistics. These risk factors point to potential factors which may impede transition efforts, or limit the employment opportunities of workers within regions.
We find that the electricity sector – as part of the broader Industry sector for which data was available – represents a source of good pay relative to other sectors. The wage premium for the sector is especially pronounced for non-managerial jobs in the Republic of Ireland and jobs with pay beneath the 75th percentile in Northern Ireland. This implies that a shift in employment to other sectors would likely leave effected workers in more poorly paid employment, particularly at the lower end of the pay scale.
We gather data from a range of sources to assess regional factors which may indicate greater or lesser resilience in the context of a transition away from fossil fuels in those areas where fossil generation is located. We find several areas which show employment overrepresentation in the electricity sector compared to what would be expected given their regional employment share. In many cases, this coincides with relatively low regional pay and labour force participation relative to the national average. Social indicators of household income per person, and various measures of poverty also highlight some areas.
We aggregate this information into a risk matrix, which examines regional risk in each domain. We find that Kerry and Clare – corresponding to the Tarbert and Moneypoint generation sites – show signs of multidimensional risk across all six measured domains. Both sites are scheduled for retirement in the next two years.
Great Island CCGT in Wexford shows risk factors in five domains. Other sites, like Sealrock in Limerick, Tynagh in Galway, Tawnaghmore in Mayo as well as Edenderry and Rhode plants in Offaly show risk in four domains.
Risk is more concentrated in the case of Northern Ireland. Derry City and Strabane – corresponding to the Coolkeeragh site – shows risk across all indicators whereas other generation sites show a maximum of two risk indicators.
In light of these risk factors, and some suggestive statistics which imply the sector presents a source of high-quality employment, particularly at the low end of the income scale, our analysis suggests that transition plans must factor in these issues and respond accordingly.
In particular, our finding that the electricity sector broadly represents a key source of well-paid employment at the bottom of the labour market is a source of some concern. Possible job losses among those who face worse prospects at similar job skill levels elsewhere in the economy, interacting with local risk factors could present a troubling cocktail of factors impeding transition efforts. Policy should be attentive to the potential spatial challenges posed by a transition in the energy sector, and act to ensure that this transition is just.