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13% Drop in Irish Wholesale Gas Prices in October compared with last year

  • Near 3-year high for Norwegian gas exports, with potential to reach annual production record
  • 17% drop in Irish wholesale electricity prices year-on-year
  • 21% of total electricity demand in Ireland met by wind energy so far this year 

Tuesday, 27th October 2015: Irish wholesale gas prices are 13% lower on average in October compared with October 2014 and 2% lower compared with last month, 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 year-on-year decrease in prices is due to an oversupplied LNG (liquefied natural gas) market coupled with increased North Sea exports, which are close to three-year highs.

In euro terms, the average day-ahead price for gas – the contract for gas delivery tomorrow – is 1.87 c/kWh in October. This compares to an average price of 2.16 c/kWh in October 2014. A fall in the value of the euro against the pound sterling over the last twelve months masked an even greater drop in prices on the UK wholesale gas market, the source from which Ireland purchases its natural gas. Prices were down 20% in sterling terms year on year.

Irish wholesale gas prices are now 26% lower (euro terms) compared with the average monthly price recorded for October over the previous three years (2012-2014). This has had a significant impact on the energy costs of many Irish businesses purchasing gas on the wholesale market, particularly in the industrial and commercial segment.

Joanne Daly, Senior Energy Analyst at Naturgy notes that while demand for natural gas increased in October, this is being more than offset by strong LNG deliveries and increased pipeline gas supplies from Norway. So far this year, Europe has experienced a glut in LNG supply with shipments reaching a 15-month high in October, meeting 15−20% of daily demand requirements during the month.

Commenting on the outlook for the winter, Ms Daly states: “With demand expected to be just slightly up on last year’s mild winter and supply looking healthy, it’s difficult to see any upward movement in price being sustained. Wholesale gas prices for the coming months present a picture of a well-supplied and stable system with Norwegian exports on track for a potential annual production record and high levels of LNG supply set to continue.” 

Ms Daly notes that, despite robust supply levels, inventories in major European storage hubs are down significantly compared with last year, with most facilities having delayed replenishing inventories until cheaper oil-indexed gas became available. As a result, UK storage levels currently stand at 85% capacity compared with full capacity this time last year.

Electricity and Renewables Update

The average wholesale price of electricity in the Irish market so far during October is 5.18 c/kWh – a decrease of 17% compared with October 2014. This year-on-year decrease is attributed to lower prices for gas, which is the main energy source used to generate electricity in Ireland. Compared to last month, however, wholesale electricity prices are up 6% − largely as a result of a lower month-on-month contribution by renewable energy sources such as wind.

Total wind generation capacity in Ireland now stands at 3,025 MW. Wind energy has accounted for 10% of overall electricity generation in Ireland so far during October, reaching a peak of 2,088 MW on the 21st of October when it met accounted for 42% of demand at the time. Some 22,944 gigawatt hours (GWh) of wind energy has been generated in Ireland since the start of the year, representing 21% of total electricity demand for the country during this period.