Although temperatures remain above seasonal norms across the country, Irish energy costs remain high with Irish wholesale gas prices 8% higher on average in May compared to April and by 37% year on year. The monthly Naturgy Energy Report for May 2018 also shows electricity prices increasing 4% on a month-on-month basis and are a substantial 38% higher compared to May 2017.
Commenting on the monthly report, Naturgy Energy Analyst, Catriona Walsh, said: “The summer period is usually considered a period of calm for the energy sector; however, rising commodity markets and low storage inventories meant gas prices have remained bullish. Likewise, the power market did not escape unscathed with a 24% drop in renewable sources in the fuel mix applying upward pressure on electricity prices throughout May.”
Ms. Walsh added: “As we enter June, record high European injections and a reduced demand may provide system flexibility and some relief on prices, however the risk of continued buoyancy in the wider commodity market will create a sustained pressure on the energy market.”
Gas Market Overview
In euro terms, Irish wholesale gas prices are approximately 8% higher on average this month when compared to April 2018. Prices have increased by 37% year on year. This month’s gains are largely a result of the wider bullish commodity market, alongside heavy summer maintenance on Norwegian infrastructure.
Following a bullish start to the summer period, prices opened just short of 2% higher than the closing week of April. The upward trend has no clear end in sight, despite temperatures remaining above seasonal norms. On a positive note, record high European injections may provide system flexibility in the months to come. Europe has managed to fill almost half its storage deficit in recent weeks.
The average Day-Ahead price for gas, the contract for gas delivery tomorrow, is 2.15 c/kWh (cents per kilowatt hour) for May. This compares with an average price of 1.57 c/kWh in May 2017.
Electricity and Wind Update
The power market did not escape the bullish sentiment experienced by gas and in the wider fuel complex this month, with the average wholesale price of electricity in the Irish market in May at 5.80 c/kWh (based on prices up until 25 May). This represents a jump of 38% year on year, and an increase of approximately 4% when compared to last month.
Renewable resources comprised 24% of the fuel mix in the last month. The average wind generation on the system for the month (based on figures up until 29 May) was 931 MW, down from an average of 1,220 MW last month, a decrease of nearly 24%.
The drop in wind generation and the prevailing strength in the gas market were the main drivers, applying upward pressure on electricity prices throughout May.