Gas and electricity prices decrease

Wholesale gas and electricity prices have tumbled over the past year on the back of increased supplies and lower demand, according to a new report.

Wholesale gas prices are down 30% compared with May of last year and wholesale electricity prices are down 12% over the same timeframe. Moreover, the weakness in wholesale prices is likely to remain into next month, according to a report compiled by the energy trading firm Vayu.

The report finds that the mild weather conditions so far this year have caused a big drop off in demand compared with 2013. Moreover, greater supplies and storage of liquified natural gas to the UK has in turn increased the availability of gas to the Irish market.

“Strong levels of gas supply mean there is very little risk of a rise in wholesale prices at present. With temperatures expected to remain at or above seasonal normal levels into June, we’re seeing prices for gas contracts further out than one month being dragged down by the prospect of reduced demand and lower requirements to build up inventories,” says Joanne Daly, Senior Energy Analyst at Vayu.

However, ongoing tensions in Ukraine with the possibility of a conflict breaking out in the region has the potential to disrupt supplies to the EU market and is a major focus for energy traders.

“While markets remain sensitive to the situation in Ukraine and continue to factor a political risk premium into prices, there has been very little upward pressure on prices,” added Ms Daly.

“In fact, concerns over Russian gas supplies to Europe appear to have further hastened the build-up of inventories in Europe.

“Storage levels within Ukraine, however, are a cause for concern as current injection rates are considered too low should any disruption to European gas supply materialise.”

The report found that the average wholesale electricity price so far in May is down 2% from the average during April and down 12% compared to this time last year.

The first four months of 2014 saw wind energy continue to make a substantial contribution toward electricity generation in Ireland with over 8,140 gigawatt hours of wind energy generated. This represented 23% of total electricity demand for the country during this period, said Vayu.