- Wholesale gas prices at 6-year lows, driven by abundant supply and strong euro
- 35% drop in Irish wholesale electricity prices for April year-on-year
- 24% of total electricity demand in Ireland met by wind energy so far this year
Sunday, 24th April 2016: Irish wholesale gas prices have plummeted over the last 12 months with average prices so far in April down 45% compared with April 2015 and down 6% compared with last month, according to the latest Wholesale Energy Market Report published by Vayu Energy. The company, which supplies gas to 20% of Ireland’s industrial and commercial market, states that the collapse in prices is due to an abundant supply of gas in Europe, suppressed demand and a significant strengthening in the value of the euro over the last year.
The average day-ahead price for gas – the contract for gas delivery for tomorrow – is 1.21 c/kWh (cents per kilowatt hour) so far in April. This compares with an average price of 2.22 c/kWh in April 2015. Irish wholesale gas prices have almost halved in euro terms (down 49%) compared with the average monthly price recorded for April over the previous three years (2013-2015). This has had a significant impact on the energy costs of many Irish businesses purchasing gas on the wholesale market, particularly for users in the industrial and commercial segment.
Gillian Lawler, Senior Energy Analyst at Vayu says that European gas markets are experiencing a glut in low-priced gas with prices having fallen to lows not seen in six years. The drop in prices is a result of increased supplies from Russia and Norway combined with strong imports of LNG (liquefied natural gas) from the Middle East.
‘’For the most part prices have been trading sideways recently, however this week there has been an increase on spot and future gas contracts, as a 22% increase on Brent crude since the start of the month makes itself felt. The rise close to $46/bbl recently was driven by news that non-OPEC oil production could experience its biggest output fall in 25 years this year.’’
‘’With weather becoming more of a factor from the end of April onwards, and a gradual increase in LNG deliveries expected during Q2, prices are expected to fall from where they are now. Strengthening in the value of the euro against sterling on the approach of the ‘Brexit’ referendum has also been a significant factor affecting Irish wholesale gas prices, given that the majority of natural gas consumed in Ireland is currently sourced from the UK wholesale gas market.”
Electricity and Wind Energy Update
The average wholesale price of electricity in the Irish market so far during April is 3.56 c/kWh – a decrease of 35% compared with April 2015 (5.52 c/kWh) and down 3% compared with last month. The drop in prices is attributed mainly to lower prices for gas, which is the main energy source used to generate electricity in Ireland. A strong contribution of renewable sources such as wind has also been a significant factor.
Ms Lawler notes that increased wind energy now plays an ever more important role in meeting Ireland’s electricity demand, helping to drive down prices and reduce the country’s dependence on more expensive sources of energy. Total wind generation capacity in Ireland now stands at 3,078 MW. Wind energy has accounted for 19% of overall electricity generation so far during April, reaching a peak of 2,442 MW on the 1st of April when it met 58% of demand at the time. Some 11,037 gigawatt hours (GWh) of wind energy has been generated in Ireland since the start of the year, representing 24% of total electricity demand during this period
Note: As part of EU Renewable Energy Directive (2009/28/EC), Ireland’s target is for 16% of total energy consumption to come from renewable sources by 2020. Electricity generation from renewable sources has a sub-target of 40% in order to meet that 16%, and renewable transport and renewable heat have their own sub targets. In order to meet these, a sizable amount of renewable energy needs to be added to the fuel mix.