May 2017: Irish Wholesale Gas Prices 18% Higher on Average than May 2016

Keith Donnelly

Keith Donnelly

Senior Energy Analyst
17/05/2017

The Vayu monthly energy report for May 2017 shows that Irish wholesale gas prices are 18% higher (in euro terms) on average this month compared with May 2016. As reported last month, wholesale prices have found a natural floor and the resistance to push lower has proven difficult to break through. Compared to this time last year the euro is trading at a stronger level, making UK gas cheaper for Irish businesses.

Commenting on the report, Vayu Senior Energy Analyst, Keith Donnelly, said: “The euro is trading at a stronger level than this time last year, making gas cheaper for Irish businesses. FX is key at the moment with Brexit negotiations still on the horizon, and a comprehensive win for Theresa May in the upcoming UK general election could mean a rally for Sterling hitting Irish businesses.”

Mr. Donnelly added: “A win for the Conservatives in the upcoming UK election will result in a strong pound and bullish gas market, while a good showing from Labour will restrict that movement somewhat. Fundamentally, everything from temperature driven demand to supply is as would be expected for the summer period.”

Market overview

Irish wholesale gas prices are 18% higher on average this month compared with May 2016. As reported last month wholesale prices seem to have found a natural floor and the resistance to push lower has proven difficult to break through. The closing days of the month saw some give as continental demand is due to be removed from the picture over the coming weeks. The Sterling/Euro currency market has moved sideways over the last month with any gains for the euro versus the pound wiped out within a day or two. Compared to this time last year the euro is trading at a stronger level, making UK gas cheaper for Irish businesses. This is key with Brexit negotiations still on the horizon, and a comprehensive win for Theresa May in the upcoming UK election could mean a rally for Sterling hitting Irish businesses.

The average day-ahead price for gas is 1.58 c/kWh (cents per kilowatt hour) for May so far. This compares with an average price of 1.34 c/kWh in May 2016. Irish wholesale gas prices are 14% lower (in euro terms) compared with the average monthly price recorded for May over the previous three years (2014-2016).

Electricity and Wind Energy Update

The average wholesale price of electricity in the Irish market so far in May is 4.28 c/kWh, an increase of 15% compared with May 2016 and down 6% compared with last month. The year on year gains can be largely attributed to the substantial increase of gas prices over the same period.

Total wind generation capacity in Ireland now stands at 3,736 MW. Wind energy has accounted for approximately 20.6% of overall electricity generation on the island of Ireland so far this month, reaching a peak of 2,751 MW on 5 May. This peak generation had the potential to meet over 61% of total electricity demand on the island of Ireland at that time.