Irish wholesale gas prices are 26% lower on average so far in December compared with December 2014, but the price charged by suppliers to gas consumers has fallen by just 4.2% in the past year.

Vayu Energy, 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 strong supplies, exceptionally mild weather conditions for December and a positive storage outlook.

A fall in the value of the euro against the pound sterling over the last 12 months masked an even greater drop in prices on the UK wholesale gas market, the source from which Ireland purchases its natural gas. Prices this month are down 33% in sterling terms year on year, lows not seen since September 2010.

Irish wholesale gas prices are now 35% lower (in euro terms) compared with the average monthly price recorded for December 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 (pictured), Senior Energy Analyst at Vayu, said: “Gas inventories are currently very healthy with storage levels now close to record highs for this time of year. Mild weather conditions have driven demand so low this month that it was possible for storage injections to take place – a situation usually unheard of in December. As a result, there is now minimal risk of any significant upward pressure on wholesale gas prices barring an unforeseen outage.”

In Association with

Collapse In Prices

The global supply glut in oil has seen Brent Crude fall 38% lower than a year ago, and close to lows not seen in over a decade. This collapse in prices is resulting in significantly weaker longer dated contracts for next summer and further out. Additional production from Libya and Iran is expected to come online in the New Year, which will add further to global supply, meaning any recovery in oil prices is likely to be gradual.

The average wholesale price of electricity in the Irish market so far during December is 4.61 c/kWh – a decrease of 27% compared with December 2014. The drop in prices is attributed mainly to lower prices for gas, which is the main energy source used to generate electricity in Ireland. Strong wind generation is also a factor, accounting for 33% of overall electricity generation in Ireland so far during December. Wind energy reached a peak of 2,518 MW on December 1, when it met 52% of demand at the time.

However, according to CSO data for consumer prices in November, the retail price of gas to consumers and small business was only 4.2% less in November 2015 than it was a year ago. The cost of electricity has decreased by only 2.5% in the same period, pointing to significant gains for suppliers who have not reduced retail prices in line with the drop in the wholesale price they pay.

The only fuel consumer market that reflects market realities is home heating oil, which is 23% cheaper for consumers than a year ago. The price of petrol is down 11% and the price of diesel is down 14% over the past year – half the rate of the decline in global oil prices.

Corrib Gas Field

The average day-ahead price for gas – the contract for gas delivery for tomorrow – now stands at 1.64 c/kWh (cents per kilowatt hour) for the month of December. This compares with an average price of 2.32 c/kWh in December 2014.

Gillian Lawler, Senior Energy Analyst at Vayu, commented: “Healthy supply and a positive storage outlook are resulting in continued downward pressure on gas prices into the first half of next year. Contracts for gas supply in Q1 2016 are now trading 31% lower compared to the first quarter of 2015 and only a weather correction or a series of unplanned outages likely to result in prices firming.”

The Corrib gas field off the coast of Mayo is expected to commence supplying the Irish network in early 2016. Currently Ireland imports 93% of its gas requirements from the UK. During days of low demand, such as the summer months, Corrib is projected to meet the full gas demand of the country.

Lawler said that the gas field is expected to meet approximately 56% of forecasted annual demand in its first year of production, thereby greatly enhancing Ireland’s security of energy supply.

The average wholesale price of electricity in the Irish market for 2015 was 5.12c/kWh – down 9.4% from the average price recorded in 2014. (This is in addition to a drop of 14% in 2014 compared with 2013.) The drop in prices is attributed to strong wind generation and lower prices for gas, which is the main energy source used to generate electricity in Ireland.

An increase in peak demand will be a factor in 2016 with the Irish economy forecast to grow by 4.1% next year according to the OECD. However, improving efficiencies in energy generation and usage mean that proportionately less energy is required as the economy grows. Higher demand is also expected to be offset by higher integration of renewables on the grid in 2016.

Wind Energy

According to Vayu, Wind energy has made a substantial contribution toward overall electricity generation to date in 2015 with total wind generation capacity on the island of Ireland now standing at 3,040 megawatts (MW). Some 30,995 gigawatt hours (GWh) of wind energy has been generated since the start of the year (up to 19th December 2015), representing over 23% of total electricity demand during this period.

Wind generation reached a peak of 2,514 MW on the 7th January when it accounted for over 48% of demand at the time.

Lawler noted that Irelands target under EU directives is for 16% of total energy consumption to come from renewable sources by 2020. Electricity generation from renewable sources has a sub-target of 40% in order to meet that 16%, and renewable transport and renewable heat have their own sub targets. In order to meet these a sizable amount of renewable energy still needs to be added to the fuel mix.

Vayu Energy supplies over 20% of Ireland's largest natural gas business users. Customers include Tesco, Bulmers, FMC and IBM. International commodity group Glencore is the largest shareholder in the business.