Irish wholesale gas prices have fallen over the last 12 months, with large business users seeing significant benefits according to the latest Wholesale Energy Market Report published by Vayu Energy.
Wholesale prices so far in February are 44% lower on average compared with February 2015 and 10% lower compared with last month. Vayu Energy, which supplies gas to over 20% of Ireland’s industrial and commercial market, states that the collapse in prices is due to an overwhelming supply of gas in Europe and a very robust storage position for this time of year.
Irish wholesale gas prices have now almost halved in euro terms (down 48%) compared with the average monthly price recorded for February over the previous three years (2013-2015).
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.
Gillian Lawler, senior energy analyst, Vayu, stated: “Abundant supplies and weak demand mean Europe is coming out of the winter season with stock levels well above normal for this time of year. This will put additional pressure on prices combined with an expected increase in LNG send-out.”
She continued: “Seasonal demand should fall from here on. So barring any unplanned outages or a sustained period of cold weather, there appears only to be more downward price pressure on the horizon. This will be welcomed in particular by energy users in the commercial and industrial sector. Many of these businesses purchase gas on the wholesale markets and have been significant beneficiaries of the collapse in energy prices to date.”
An almost unprecedented drop in oil prices is resulting in significantly weaker gas contracts for next summer and further out. With US oil inventories now at an 86-year high, very low prices will continue to suppress longer-dated gas contracts indexed to oil. Additional production from Iran is also coming online, which will add further to the glut in global supply. Coupled with the beginning of a global slowdown in oil demand, this means the outlook remains bearish.
The report also showed that wind energy is playing an ever more important role in meeting Ireland’s electricity demand, helping to drive down prices and reduce the country’s dependence on more expensive sources of energy.
Total wind generation capacity in Ireland now stands at 3,042MW. Wind energy has accounted for 31% of overall electricity generation so far during February, reaching a peak of 2,662MW on the 16th of February when it met 49% of demand at the time.
As part of EU Renewable Energy Directive, Ireland’s target is for 16% of total energy consumption to come from renewable sources by 2020.