Interconnector drives price cuts

Wholesale electricity prices in Ireland have fallen by 11% since Eirgrid’s €600 million East West 500mw Interconnector with Britain became fully operational, the latest Bord Gáis Energy Index reveals.

As there are a number of variables involved in determining the cost of electricity, it is too early to determine if the interconnector will drive prices down significantly for consumers in the coming months, but the trend is in the right direction.

And Eirgrid is planning a €1bn interconnector to France, to be completed by 2025 as part of a plan to integrate Ireland into the wider European electric grid and give Irish consumers access to cheaper, nuclear-generated electricity from France.

The Bord Gáis Energy Index fell 5% in May and recorded its lowest reading in 2013 following record highs earlier this year. As a result, the index now stands at 138, a decrease of 4% compared to May 2012.

Commentary with the BGE Index said the 11% decline in Irish wholesale electricity prices in May came as wholesale UK gas prices continued to soften from the record highs seen in previous months.

“In addition, the full availability of Ireland’s new sub-sea power cable, which connects the Irish and British power grids, suppressed Irish wholesale electricity prices as Ireland benefited from increased power imports from the UK.

“Brent crude prices fell as traders continued to digest the potential impact of North American shale oil production on the global oil market, coupled with weaker Asian demand as China’s economy slows,” the commentary said.

Power trader at Bord Gáis Energy, John Heffernan, said: “Fall in all four of the fuel commodities that make up the Bord Gáis Energy Index resulted in a 5% month-on-month drop in the May Index. Irish wholesale electricity prices fell 11% and the UK Day-ahead wholesale price also softened.

“Despite this, at 66p a therm, the UK average monthly Day-ahead wholesale gas price was at an all-time high for the month of May.

“The reasons for this were, planned and unplanned Norwegian field maintenance, unseasonably cold weather and an aggressive push to refill storage stocks.”

Mr Heffernan said oil traders’ price assessment may have been influenced by the release of the International Energy Agency’s (IEA) Medium-Term Oil Market Report which emphasised that a “supply shock from North American oil is rippling through global markets”.

“Evidence of the impact of North American oil production was clear at the end of the month as US crude oil inventories hit an all-time high.

“News that China’s manufacturing sector contracted in May and the OECD pared back its forecast for China’s growth also weighed on prices.

“However, in the short-term OPEC’s influence will continue to attempt to steer prices toward $100.

“With Brent oil closing the month at $100.39, it is difficult to see prices trading below this level in the short term,” he added.