- 10% drop in Irish wholesale gas prices last month (euro-equivalent)
- UK Gas in Storage down 20% compared with this time last year
- 22% of total electricity demand in Ireland met by wind energy so far this year
Wednesday, 2nd September 2015: Irish wholesale gas prices were 10% lower on average in August compared with July, according to the latest Wholesale Energy Market Report published by Naturgy Energy. The company, which supplies gas to over 20% of Ireland’s industrial and commercial market, states that the month-on-month decrease was due to a surge in gas supplies from Norway and a glut of shipments of LNG (liquefied natural gas).
However, wholesale gas prices were up 9% compared with August 2014. The year-on-year increase was due largely to a fall in the value of the euro against the pound sterling over the last twelve months which has made euro-equivalent purchases more expensive in the UK wholesale gas market, the source from which Ireland purchases its natural gas.
In euro terms, day-ahead prices for gas – the contract for gas delivery for tomorrow – averaged 1.9 c/kWh in August. This compared to an average prices of 2.10 c/kWh in July 2015 and 1.74 c/kWh in August 2014.
Joanne Daly, Senior Energy Analyst at Naturgy notes that gas prices experienced significant downward price pressure in August as a result of increased LNG shipments into Europe from major exporters in the Middle East such as Qatar. LNG contributed to approximately 25% of daily demand requirements during the month. Further downward pressure resulted from strong Norwegian supply and extremely weak oil prices, which fell to a fresh six and a half year low of less than $43 per barrel during August.
“LNG has been a major component in Europe’s gas supply mix this year with shipments from the Middle East up significantly on foot of weak demand from Asian markets,” says Ms Daly. “However, supplies look set to ease back during September – this, combined with network maintenance in the North Sea, could result in upward pressure on prices in the coming weeks.”
Ms Daly notes that the wholesale contract for gas this winter and other longer term contracts fell to five-year lows during August. The extremely bearish Brent crude oil market was the main driver of the downward momentum, with some longer dated supply deals in mainland Europe partly indexed to oil prices.
Commenting on the low levels of gas storage experienced across much of Europe in recent months, Ms Daly notes that inventories in major European storage hubs are down significantly compared with this time last year. While injections into storage usually commence in April, most facilities waited until July before replenishing inventories this year when cheaper oil-indexed gas became available to inject. Storage stocks across the UK now stand at 72% fullness compared with a level of 92% at the same point last year.
Electricity and Renewables Update
The average wholesale price of electricity in the Irish market for the month of August was 5.01 c/kWh – a decrease of 3% on the average price in July and up 4% compared with August 2014. The year on year increase compared with August 2014 can be attributed to higher prices for gas, which is the main energy source used to generate electricity in Ireland.
Total wind generation capacity in Ireland now stands at 3,025 MW. During August, wind energy accounted for 17% of overall electricity generation in Ireland. Some 20,735 gigawatt hours (GW) of wind energy has been generated in Ireland since the start of the year, representing 22% of total electricity demand for the country during this period. Wind generation during the month of August reached a peak of 2,249 MW on the 3rd of August when it accounted for 55% of demand at the time.