Wholesale gas prices have continued to fall since early February with prices in July 2017 18% lower than the average for the year to date and a substantial 41% lower than peak prices last winter. According to this month’s Vayu Energy Report, a proprietary market review and forecast for Ireland’s wholesale gas, electricity, wind energy and market pricing, prices for this winter are at one of the lowest points seen this year. Wholesale gas prices for October 2017 to March 2018 are over 7% cheaper than wholesale prices for the same period last year.
While the market price in sterling terms has fallen since the peak in February, it is still above rates seen last year. However, the weak pound has driven Irish gas prices lower than 12 months ago. Wholesale gas prices are now back to the low levels seen in 2016.
However, it’s not all positive news with wholesale power prices rising in July; the contribution by wind generated power to the supply mix dropped by over 45% to date when compared with the same period last month.
Commenting on the report Vayu Senior Energy Analyst, Keith Donnelly, said: “While there’s volatility in the market, prices during the summer have again shown the value available to Irish businesses when they take the right strategy for their energy budget. Gas users can expect their July bills to be up to 25% cheaper than the first quarter of the year. There is potential to continue the good news story into winter-17. Prices are trading close to yearly lows and are 7% cheaper than last year’s outturn. If you look at your gas requirements in conjunction with the current strength of the euro, there may not be a better time to look at your future needs.”
Mr. Donnelly continued: “There are several unpredictable variables in the market, including the announcement that Rough, the large storage facility off the east coast of the UK, would be decommissioned and also the low storage levels in The Netherlands. In our view, taking a longer term view on energy requirements would be the sensible thing to do.”
“The main concern that Vayu sees at the moment is the uncertainty and risk of the market getting uneasy if it experiences sustained periods of a supply shortages. Vayu’s Energy Report for July 2017 shows that now may be a good time for Irish industrial and commercial businesses to lock in winter energy needs.” Mr. Donnelly added.
Irish wholesale gas prices are 1% cheaper on average this month compared with July 2016. While the market price in sterling terms has fallen since February, it is still above rates seen last year. However, the weak pound has seen Irish gas become cheaper than 12 months ago.
The drop in demand has eroded prices over the last couple of months, with maintenance in June on the Interconnector to Europe helping prices reach a new floor. Strong supply, particularly from LNG, through the first half of July helped soften prices further. Production and processing issues at a number of fields in Norway have helped prices recover since the middle of the month.
The average day ahead price for gas, the contract for gas delivery tomorrow, is 1.38 c/kWh (cents per kilowatt hour) for July so far. This compares with an average price of 1.40 c/kWh in July 2016.
Irish wholesale gas prices are 19% lower (in euro terms) compared with the average monthly price recorded for July over the previous three years (2014-2016). Prices are also 40% lower than 2017’s peak recorded in early February and 18% cheaper than the average year to date.
Electricity and Wind Energy Update
The average wholesale price of electricity in the Irish market so far in July is 4.08 c/kWh, an increase of 7% compared with July 2016 and up 10% compared with last month. Prices have risen so far in July as the contribution by wind generated power to the supply mix has dropped by over 45% to date when compared with the same period last month.
Total wind generation capacity in Ireland now stands at 3,736 MW. Wind energy has accounted for approximately 15.4% of overall electricity generation on the island of Ireland so far this month, reaching a peak of 2,487 MW on 15 July. This peak generation had the potential to meet 62% of total electricity demand on the island of Ireland at that time.