The Public Service Obligation (PSO) Levy is set to return in Ireland from October 2024, with a notable impact on electricity bills for businesses across the country. After a year where the PSO was set to zero due to high wholesale electricity prices, the levy will now require a significant contribution from all electricity consumers, including domestic and commercial sectors. This article explains the changes to the PSO Levy for the 2024/25 period, its purpose, and what businesses need to know.
What is the PSO Levy?
The PSO Levy is a government-mandated charge applied to all electricity customers in Ireland. It is used to fund renewable energy projects, such as wind and solar power, ensuring Ireland meets its climate goals and reduces reliance on fossil fuels. The Commission for Regulation of Utilities (CRU) calculates the PSO annually, determining how much needs to be collected to support renewable energy generation.
For the 2024/25 year, the total PSO Levy will amount to €251.79 million, after being set to zero for the previous year. This levy supports key schemes such as the Renewable Energy Feed-In Tariff (REFIT) and the Renewable Electricity Support Scheme (RESS).
How Much Will Businesses Pay?
For businesses, the PSO Levy will once again add a fixed charge to their electricity bills. This charge will vary based on the size of the business:
•Small commercial customers (with less than 30 kVA capacity) will pay a monthly charge of €12.91.
•Medium and large commercial customers will be charged €1.57 per kVA of capacity.
The levy represents a new cost after a year where businesses were relieved from PSO charges, making it important for companies to budget for the increase in their energy overheads.
Why is the PSO Levy Increasing?
The PSO Levy’s return in 2024/25 follows a significant change in market conditions compared to the previous year. There are several key reasons for this increase:
1. Lower Wholesale Electricity Prices: The PSO operates with an inverse relationship to wholesale electricity prices. When prices are high, as they were in 2023/24, less support is needed from the PSO to subsidise renewable energy. However, as electricity prices fall, the need for PSO funding rises to cover the costs of renewable generation. The forecast for 2024/25 indicates lower electricity prices, leading to a higher PSO Levy requirement.
2. Positive R-Factor from 2022/23: A reconciliation mechanism, known as the R-Factor, is used to correct for differences between forecasted and actual electricity market prices. For the 2022/23 period, the CRU identified that suppliers had overpaid into the PSO fund. The adjustment for this overpayment is carried forward, leading to an increase in the 2024/25 PSO Levy.
3. Support for Renewable Energy Projects: The PSO Levy is crucial for funding Ireland’s renewable energy projects under the REFIT and RESS schemes. These schemes provide financial support to energy generators, ensuring Ireland continues to progress towards its carbon reduction targets.
Renewable Energy: Key Contributor to Ireland’s Electricity Supply
As Ireland pushes towards a lower-carbon future, the PSO Levy plays a critical role in supporting renewable energy projects. In 2023, 42% of Ireland’s electricity was generated from renewable sources, and the 2024/25 levy will support over 4,459 MW of renewable capacity. Wind energy, in particular, remains a major contributor to the national grid, making up a significant portion of Ireland’s electricity supply.
Business Implications
For businesses, the Levy is an unavoidable cost, but there are ways to manage its impact. While the fixed charge element of electricity bills will increase due to the PSO, it’s important to note that variable charges, such as the price per unit of electricity, could decrease if wholesale electricity prices drop as forecasted. Businesses should explore energy efficiency measures and consider switching suppliers to find the most competitive rates. To learn more about how the PSO Levy will effect your bill contact our team at Cost.ie today!
Additionally, renewable energy projects supported by the PSO Levy contribute to a more stable and sustainable energy supply, reducing Ireland’s reliance on imported fossil fuels. This can have long-term benefits for businesses by stabilising energy costs and improving environmental performance.
FAQs About the PSO Levy
The Public Service Obligation (PSO) Levy is a government charge applied to all electricity customers in Ireland. It funds renewable energy projects such as wind, solar, and biomass, supporting the country’s transition to a low-carbon future.
The PSO Levy for 2024-2025 has increased to €251.79 million, after being set to zero in 2023-2024. This is due to a combination of factors including lower wholesale electricity prices, which require greater subsidies for renewable energy projects, and the inclusion of a significant adjustment (R-factor) from previous years.
For the 2024-2025 period, domestic customers will be charged an additional €3.23 per month. Small commercial customers will pay €12.91 per month, and medium/large commercial customers will be charged €1.57 per kVA (based on their energy capacity).
Yes, the PSO Levy is reviewed and recalculated annually by the Commission for Regulation of Utilities (CRU). Changes in energy market prices and renewable energy project costs can affect the levy each year.
No, the PSO Levy differs based on customer categories. Domestic and small commercial customers have fixed monthly charges, while medium and large commercial customers pay based on their energy capacity (in kVA).
