Irish wholesale gas and electricity prices have increased by 22% and 23%, respectively over the past year according to the latest Naturgy Energy Review and Forecast. The report shows that while prices fell on a month-by-month basis, prices remain bullish going into December. The review shows gas and electricity prices fell by 3% and 7% respectively compared to last month.
While wholesale gas prices saw some volatility mid-month due to cold weather forecasts and strong trading in Brent crude and coal markets, above seasonal temperatures caused prices to remain relatively neutral for the month.
Commenting on the review, Naturgy Energy Analyst, Lauren Stewart, said: “With relatively small storage capacity, a cold winter may see demand increase and storage tanks being quickly depleted. At this time of year, a significant share of UK gas usage is for heat generation, with temperature being a significant indication of potential demand on the system and subsequently the direction of prices.”
“The introduction of the all-island electricity market, I-SEM, has brought a new structure designed to encourage competition in the market by optimising the use of cross-border transmission assets which we are now beginning to see in wholesale prices”, added Ms Stewart.
Gas Market Overview
Wholesale gas prices remained neutral overall in November with significant gains of 9.5% on the Day-Ahead contract in the first two weeks of the month before quickly tapering off due to a healthier wider energy complex, with prices averaging 3% lower than October 2018. Bullishness mid-month was due to increased confidence in cold weather forecasts and strong trading in Brent crude and coal markets.
Nervousness around a potential cold snap saw Day Ahead prices hit a high of 70p/therm on 15th November. Roughly 40% of Britain’s gas usage is for heat generation, with temperature being a significant indication of potential demand on the system and subsequently the direction of prices. For much of the month Britain averaged 1.8°C above seasonal norms, causing prices to remain relatively neutral for the month of November.
Electricity and Wind Energy Update
Ireland’s new wholesale electricity market (I-SEM) is now in its second month of trading with a new structure designed to encourage competition in the market by optimising the use of cross-border transmission assets, putting downward pressure on prices. On average, prices for the month of November were 6.86 c/kWh, down 7% from the previous month.
Renewable sources of generation made up 38.58% of the aver-age fuel mix with average wind generation accounting for 1,836 MW, up 25% from the previous month. In I-SEM, consistency of wind on the system has a significant influence in establishing the price.
Wind can change dramatically in a short space of time which contributes to the volatility in prices. Increased wind on the system feeds into the softening of prices. With less demand on the system and renewables being a cheap form of generation they often set the price for night time periods. Night time prices for the month averaged at 5.14 c/kWh, down 16% from the previous month.