April 2015 Energy Market Report: 8% Increase In Irish Wholesale Gas Prices

  • rish wholesale gas prices (euro-equivalent) up 8% year on year and 1% month on month
  • Increase in prices driven by weakening of Euro against Pound Sterling
  • April 2015 prices still down 9% compared with average April prices for previous 3 years
  • Surge in LNG shipments and strong supplies from Russia exerting downward pressure
  • Irish wholesale electricity prices up 3% year on year and 6% month on month

Monday, 27th April 2015: Irish wholesale gas prices are 8% higher on average in April compared with April 2014 and 1% higher compared with last month, according to the latest Wholesale Energy Market Report 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 in prices is largely due to a significant weakening of the Euro over the last twelve months.

The drop in the value of the Euro against the Pound Sterling has masked a fall in prices in the UK wholesale gas market, the source from which Ireland purchases its natural gas. The day-ahead price on UK NBP gas market* – the contract for gas delivery for tomorrow – finished trading on Friday 24th April at 44.70p (sterling pence per therm). Average day-ahead prices in Sterling for April were down 5% compared with April 2014 and were flat against last month.

Despite the currency effect, wholesale gas prices in Ireland remain 9% lower in Euro terms compared with the average monthly price recorded for April 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.

On the supply side, the report reveals that Europe continues to experience a surge in LNG (liquefied natural gas) shipments from the Middle East on foot of a collapse in Asian gas prices, which show no sign of recovery. Meanwhile strong gas flows from Russia into mainland Europe are making up for a drop in Norwegian supply into the continent due to scheduled maintenance in the North Sea. With tensions between Russia and Ukraine easing, this trend is likely to continue.

However, downward pressure on prices in April has largely been offset by concerns over a potential restriction in capacity at the Rough storage site in the UK – the largest such facility in Europe. These concerns have since become a reality with confirmation of a 25% restriction in maximum capacity at the site until the end of September. Concerns over restrictions on gas production by the Dutch government and falling North Sea supply due to scheduled maintenance have also had an impact on prices.

Joanne Daly, Senior Energy Analyst at Naturgy states: “Although Norwegian exports into mainland Europe have fallen back, supplies into the UK are actually higher year on year as Norway makes a concerted effort to defend its gas market share in the UK amid growing amounts of cheap spot LNG availability. This positive supply outlook combined with steady demand forecasts is likely to result in lower gas prices into May.”

Commenting on the impact of strong LNG supplies, Ms Daly states: “Weak Asian gas prices look set to last for the foreseeable future. And this has led to a further strengthening of the longer-term supply outlook with more LNG shipments expected to arrive in Europe. While any unplanned outages in the North Sea could pose some short-term price volatility, this should be capped by confidence in on-going LNG deliveries.”

Irish Electricity Update

Despite lower demand compared to last month, the average wholesale price of electricity in the Irish market so far in April is 5.68 c/kWh – an increase of 6% on the average in March and up 3% compared with April 2014. The month-on-month increase in electricity prices is due to a combination of lower levels of wind generation in April and higher gas prices, which is significant as generation of electricity in Ireland relies heavily on gas generating plants and is the main fuel used in the generation fuel mix.

Wind energy has accounted for 17% of overall electricity generation in Ireland so far in April. Some 8,627 gigawatts of wind energy have been generated since the start of the year, representing 25% of total electricity demand for the country during this period. Wind generation in April reached a peak of 1,776 MW at 09:15 on the 3rd of April when it accounted for 53% of demand at the time.