2025 marks 25 years since Ireland began the journey of liberalising its electricity market. ESB’s Head of Corporate and Regulatory Affairs Peter O’Shea looks back at how and why liberalisation came about – and the impact it has had on economic growth, cross-border energy collaboration, and the rise of green electricity.
Why markets began to open
For decades, national electricity systems were monopolies: a single utility was responsible for generation, transmission and distribution of power, and for selling electricity to end customers. This began to change in the late 1980s as countries like the UK and Norway started to open their electricity systems to competition – a process known as liberalisation. The European Union introduced similar measures through an electricity directive in 1996.
In Britain and elsewhere, liberalisation was intended to reduce costs and give customers greater choice, at a time when electricity demand was falling due to energy efficiency and deindustrialisation. Ireland, however, was on a very different path at this time, with electricity demand rising rapidly as the Celtic Tiger economy started to growl. Here, the liberalisation agenda set the wheels in motion for fresh investment in the new generation and network assets needed to meet this demand, while delivering customer choice through competitive generation and supply markets.
How liberalisation unfolded
After the Irish Electricity Regulation Act was passed in 1999, market opening began in February 2000. This meant major changes for ESB as the incumbent national utility. The Customer Services business unit was fundamentally restructured into ESB Networks, established as a standalone business, and a separate retail business – initially known as ESB Customer Service, today operating as Electric Ireland.
An independent regulator – the Commission for Electricity Regulation (CER, today CRU) – was put in place to oversee the move to an open market. CER was tasked with developing wholesale and retail market rules, and with economic regulation of the network activities of ESB Networks as the Distribution System Operator and Transmission Asset Owner, and EirGrid as the newly formed Transmission System Operator and Market Operator.
Measures were introduced to bring new players into the supply and wholesale electricity markets. ESB supported this through initiatives like the Virtual Independent Power Producer (VIPP) product and its Green VIPP equivalent – which enabled new electricity suppliers to secure wholesale generation and compete for customers – and the 3rd IPP Programme, which resulted in long-term contracts from ESB to secure the entry of new power plants in Tynagh, Co Galway, and at Aughnish Alumina on the Shannon. ESB also put in place the Market Opening IT Programme: the largest IT project in Ireland at the time, and crucial to enabling supplier choice to residential customers.
These changes transformed Ireland’s electricity landscape, providing greater choice to customers. Between 2000 and 2023, ESB’s share of generation output fell from 95% to 27%; its share of the supply market fell from 100% to 40%.
Three lasting impacts of liberalised electricity markets
Powering economic growth: With Ireland’s electricity demand growing by 70% and GDP almost doubling in the decade before liberalisation, market opening was needed to enable major investment in the electricity network and in generation capacity. This made Ireland quite different to the UK and other jurisdictions, where liberalisation primarily sought to provide customer choice and drive efficiencies by sweating existing assets.
Liberalisation in Ireland made this investment possible: with a regulator in place charged with overseeing efficient development of the electricity system, ESB as a commercial semi-state could invest profits and borrowings directly into Ireland’s energy infrastructure – ensuring that our electricity system was capable of supporting economic and social development into the new millennium.
Around €15 billion has been invested in our networks since 2000. This was essential in supporting Ireland’s astonishing growth over this period: the population sprung up by around 40% and GDP quadrupled, as electricity demand rose from 20TWh in 2000 to 32TWh in 2023.
Strengthening cross-border energy collaboration: Liberalisation paved the way for the all-island Single Electricity Market (SEM), established in 2007 as the trading platform for electricity on the Island of Ireland. When I-SEM was created in 2018, the focus reoriented to the east-west market, and interconnection has physically linked the two systems since 2003.
Brexit halted progress towards full market integration, however, with 2025 also marking the fifth anniversary of the UK’s formal exit. Time will tell if a framework can be re-established for greater integration, yet the benefits of SEM and north-south energy collaboration remain clear to stakeholders across the island of Ireland.
Opening the door to green energy: 2025 also marks another anniversary – 10 years since the 2015 Paris Climate Agreement. Market liberalisation has played an important role in Ireland’s journey to green energy. The 1999 Electricity Regulation Act gave a boost to ‘green’ electricity suppliers: during the first phase of liberalisation, they were permitted to sell directly to all customers regardless of how much electricity the customer consumed, whereas fossil-fuel-based suppliers could only sell to large energy users.
The result was an upswing of activity in green generation that has reshaped our energy landscape. From just one wind farm generating 6.5MW in 2000, over 300 wind farms now deliver almost 5GW of electricity to the Irish grid. The system can also draw on 1GW of solar power, including from 100,000 microgenerators, and 1GW of battery storage – all non-existent just five years ago.
As the role of the electricity system in a more climate-conscious world has evolved, ESB’s strategic direction has shifted – today embodied in our drive to achieve net-zero emissions by 2040, as an essential stepping stone to a net-zero Ireland by 2050.
What the future holds
The need to address climate change has fundamentally transformed electricity market dynamics. Back in 2000, the market approach was to optimise price and deliver a secure system. When climate action was introduced as a third variable, this became a more complex consideration – confronting energy systems with a ‘trilemma’ of objectives. As the drive to decarbonise accelerates, a more centralised planning model is emerging, with similar trends seen in other countries such as Britain.
Looking to the future, it will be key to keep harnessing innovation and market-based solutions, within this more planned approach. Overall market design will need to be looked at again, to ensure we can deliver the right new capacity to meet demand, dispatch it in a way that minimises costs, and send the right signals to customers to encourage more active participation in the market.
Twenty five years ago, we embarked on a journey to deliver a competitive electricity system focused on customer choice and ensure sufficient investment in new generation and networks. The greatest driving force for market evolution going forward will be the drive to get Ireland to net zero by 2050 – while continuing to sustain a strong and growing economy.