CAPITAL INVESTMENTS in the energy sector, including the €600 million electricity connection between Ireland and Britain, should be deferred until more rigorous economic studies are conducted, according to a new report.

The report from the Irish Academy of Engineering has called for “a major and early review” of national energy policy to reflect the economic downturn.

The academy says projections for energy demand have not taken account of the recession, and that capital investment could reach €30 billion by 2020.

It recommends that some proposed projects be frozen and subjected to more detailed economic analysis to assess their impact on customers’ electricity rates.

The academy’s president, Michael Hayden, suggested that investments be cut by at least 50 per cent, pending further studies. “If your capacity outstrips demand, the consequence is that the prices will go up.”

Kieran O’Brien, chairman of the academy’s energy committee, which drafted the report, said the State has sufficient generation, and that over-investment in the sector would burden consumers and firms with higher energy costs. “We would have some concerns that plants would require very, very extensive investments to accommodate a lot of renewable energy, which, in the short-term, isn’t necessary.”

Mr O’Brien said the Government’s target of renewable energy accounting for 40 per cent of consumption by 2020 was “significantly beyond” the optimal level, and could add to energy costs.

Energy demand is expected to grow by 10 per cent between 2008 and 2020, compared with an estimate of 30 per cent before the economic crisis, the academy said.

“Our concern is that we would be investing particularly in networks for a demand that isn’t there,” said Mr O’Brien, adding that global demand for energy had fallen for the first time since the second World War.

The academy said there should be “a major step-up” in energy conservation over the next three to four years, and all areas of emerging technology should be considered by the Government.