Consumers and businesses will have to fund a number of extra incentive payments to power companies after the all-island energy market is introduced next November.

Generators will benefit from "capacity" payments simply for being available to supply electricity to the market, and from "constraint" payments, which will be paid when they make power available for sale but grid constraints prevent it from going on the market.

The payments are detailed in the market's trading and settlement code and are designed to act as incentives to players to invest in the market. The capacity payment will be set once a year and will be linked to the cost of running a modern, efficient power plant.

A study published by the Economic and Social Research Institute (ESRI) yesterday says that the incentive will be paid for by electricity users.

The institute explains that the Commission for Energy Regulation in the Republic and the Northern Ireland Authority for Utility Regulation, the bodies which "designed" the market, decided on the payment mechanisms as an incentive to generators to invest in the island.

Demand for power is going to continue growing at a rapid rate across Ireland, the ESRI study says. Its figures show that it will hit 10,000 megawatts by 2010. This is about 80 per cent more than the peak demand experienced in the Republic last December, when energy use hit an all-time high.

The ESRI warns that capacity is already so tight in the market that forced shutdowns of ageing plant during winter peak demand could "sharply increase the risk of shortages".

It also points out that the need for investment is sharpened by the fact that old generators will have to be shut down.