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2015 Half Year Energy Report: 23% Increase in Wholesale Gas Prices Compared with 2014

  • Irish wholesale gas prices for June 2015 (euro-equivalent) up 23% year on year
  • European gas inventories down 25% compared with last year
  • Wholesale electricity prices down 9% on average during the first six months compared with same period last year
  • 25% of total electricity demand in Ireland met by wind energy during first half of the year

Wednesday, 8th July 2015: Irish wholesale gas prices on average were 23% higher in June compared with June 2014, 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 increase was due to a weaker Euro, higher demand for gas and a series of unplanned outages in the UK and North Sea.

An 11.5% weakening of the Euro against the Pound Sterling over the last year has made euro-equivalent purchases more expensive in the UK wholesale gas market, the source from which Ireland purchases its natural gas. Meanwhile, the average day-ahead price on the UK NBP gas market* – the contract for gas delivery for tomorrow – was 43.4p (sterling pence per therm) in June, up over 10% year on year.

On the supply side, the report reveals that Europe continues to experience a surge in LNG (liquefied natural gas) shipments from the Middle East. Joanne Daly, Senior Energy Analyst at Naturgy states: “LNG has been a key component in the UK supply mix so far this year, with a significant increase in shipments coming from major suppliers such as Qatar. This continued trend exerted downward pressure on prices throughout the first half of the year and is largely due to low demand in Asian markets, with major buyers such as Japan and Korea now well supplied through long-term contracts.”

Commenting on the low levels of gas storage across much of Europe in recent months, Ms Daly notes that inventories in major European storage hubs are at 39% capacity, down 25% compared with the same time last year. Most facilities have waited for gas prices to drop before replenishing inventories with cheaper Russian oil-indexed gas expected to become available in the third quarter. While injections usually commence in April of each year, they did not begin to any significant extent until last month. Storage stocks in the UK have increased from a level of 21% fullness at the end May to a level of 38% by the end of June. This compares with 81% fullness across all sites at the same point last year.

“While prices are likely to remain steady in the short-term, some upward pressure on prices is likely to result from record storage injections in July,” says Ms Daly. “Reductions in Dutch supply could also put pressure on the system to meet demand requirements. The risk is somewhat mitigated, however, by lower demand elsewhere and the completion of the Norwegian network maintenance season as of the end of June.”

Electricity and Renewables Update – 2015 Half Year

The average wholesale price of electricity in the Irish market for the first six months of 2015 was 5.35c/kWh – down 9% compared with the same period last year. The average price for the month of June was 4.98c/kWh – a decrease of 3% on the average in May and down 2.7% compared with June 2014. The continuing integration of wind energy onto the grid is assisting in reducing the amount of gas fired generators used to produce electricity, which is typically more expensive than that generated from renewable sources.

Wind energy has made a substantial contribution toward overall electricity generation on the island of Ireland during the first half of 2015. Over 16,209 gigawatt hours (GWhs) of wind energy has been generated since the start of the year. Wind energy supplied over 25% of total electricity demand during the first six months and reached a half-year peak of 2,514 MW on the 7th January when it accounted for almost 49% of demand at the time.

“We are continuing to see wind energy play an ever more important role in meeting Ireland’s electricity demand,” says Ms Daly. “This will continue to grow over the coming years in light of an agreement by EU leaders to set a 27% target for energy consumption from renewable sources by 2030. Wind energy will be the primary source of this in Ireland, requiring the installation of substantial additional wind generation capacity between now and then.”