Energy outlook 2026: Navigating volatility with strategic clarity

Ireland enters 2026 at a defining moment in its energy transition. Following a year marked by rapid economic expansion, major policy announcements and several landmark transactions, the emphasis now shifts from planning to delivery. The coming year will test the resilience of Ireland’s energy system while offering significant opportunities for investors, developers and policy makers committed to accelerating decarbonisation. This outlook examines the macroeconomic, policy and market forces shaping Ireland’s energy landscape in 2026.

A resilient economic backdrop

Ireland’s economy continued to outperform expectations in 2025. GDP grew by approximately 10%, fuelled in part by export front loading ahead of anticipated global trade frictions. Growth is expected to moderate to around 3% in 2026 but remains strong by EU standards. Inflation, which reached 12.6% at its peak in 2022, eased to roughly 3% in Ireland in 2025, with further stabilisation forecast to bring it closer to 2% this year.

Monetary conditions have also become more supportive. After rising steeply through 2022–2023, interest rates began to fall in mid 2024. The ECB refinancing rate dropped by around two percentage points between June 2024 and June 2025, lowering the cost of capital for new energy infrastructure. This has already translated into improved investor confidence and a series of notable transactions across the market, including ESB–Ørsted’s 900 MW Tonn Nua offshore wind project, a €2.5 billion acquisition in the utility space, and Ireland’s first large scale multi buyer corporate PPA.

Global dynamics: volatility and resilience

While domestic indicators were strong, 2025 was defined globally by geopolitical turbulence. The war in Ukraine continued, and tensions in the Middle East pushed oil prices above $100 per barrel. Despite this backdrop, global GDP held steady at 1.5%, with the EU projected to grow at a modest but stable 1.5-1.8% through 2027.

In the Irish Single Electricity Market (SEM), wholesale electricity prices averaged €114.67/MWh in 2025 – the highest in Western Europe. Although nearly 50% lower than the 2022 crisis peak, prices remain more than double 2020 levels. Constraints in the electricity system persisted, with dispatch down rates for wind and solar exceeding 10% in the second half of the year, driven by grid limitations and curtailment.

A milestone year for policy reform

2025 delivered some of the most far reaching energy policy developments Ireland has seen in a decade. The Renewable Heat Obligation (RHO) moved forward, setting requirements for renewable heat fuels from 2026 and stimulating significant demand for biomethane. New policies for large energy users (LEUs) require data centres to provide dispatchable on site or proximate generation, while also sourcing additional renewable power within six years. Private wire rules were clarified, paving the way for direct, generator to consumer energy supply arrangements.

Crucially, the PR6 regulatory determination set out record investment plans, with €14.1 billion in baseline grid spend between 2026 and 2030 and up to €18.1 billion available via an Agile Investment Framework. This will underpin the delivery of 4.4 GW of new distribution connected renewables and 5 GW of offshore wind capacity. Other developments included progress on long duration storage procurement, Northern Ireland’s upcoming Renewable Electricity Price Guarantee auctions, and broader infrastructure acceleration measures under the National Development Plan.

What to watch in 2026

Onshore wind: Momentum is strong, with more than €500 million in projects reaching financial close in 2025 and over 400 MW currently in construction. With around 3 GW of consented projects in the pipeline, further final investment decisions are likely this year.

Solar: Ireland’s utility scale solar pipeline reached 9.5 GW by late 2024, reflecting dramatic growth from only a few hundred megawatts in 2020. As projects awarded under successive RESS auctions grow in size – averaging nearly 48 MW in RESS 5 – the focus for 2026 will be on delivery and grid integration.

Grid delivery: Implementation of PR6 will be a key test of Ireland’s ability to scale infrastructure rapidly amid labour, supply chain and planning constraints.

Affordability: With affordability expected to dominate public discourse in 2026, competitiveness and consumer impact will be central to energy policy decisions.

Energy security: Ongoing global uncertainties will keep Ireland’s strategic gas reserve and LNG options high on the agenda.

Targets and compliance: Ireland is projected to fall significantly short of its 51% emissions reduction target for 2030. Engagement with the EU on potential fines will be closely watched.

Offshore wind: Progress on ORESS 1 projects, including ESB–Ørsted’s Tonn Nua, will hinge on permitting, regulatory clarity and grid access.

Biomethane and hydrogen: The RHO will spur biomethane demand, while the long awaited hydrogen strategy and associated pilot initiatives may start to emerge.

Ireland’s energy transition is entering a decisive execution phase. With sustained policy momentum, improved financing conditions and rising investor appetite, 2026 has the potential to mark a substantial shift from ambition to delivery. KPMG will continue supporting clients as they navigate this complex, fast evolving landscape with insight, clarity and strategic foresight.

James Delahunt
Partner Corporate Finance, Head of Energy and Natural Resources, KPMG in Ireland