Energy costs to be 'much higher' in summer months for years as grid still reliant on gas

Cornwall Insight said its analysis shows that wind, and to a much lesser extent solar, will account for 58% of the power on the grid, up from 45% currently, but 'with a significant gap' during the summer months when the wind doesn't blow. 

The all-Ireland power grid will still rely on gas to generate power when the wind doesn't blow, suggesting that the costs will be "much higher" in the summer months for several years to come, a leading consultancy has warned. 

Cornwall Insight said its analysis shows that wind, and to a much lesser extent solar, will account for 58% of the power on the grid, up from 45% currently, but "with a significant gap" during the summer months when the wind doesn't blow, extending beyond 2030. 

“Energy prices are currently at an all-time high with low-capacity margins meaning Ireland is having to run expensive and environmental damaging coal- and gas-fired generators to ensure supply, all the while the Russian invasion of Ukraine continues to have a significant impact on gas wholesale prices across Europe," said Niall Durham, senior consultant at Cornwall Insight. 

More renewable energy means that less gas will be used but price differences will likely open up between the seasons. 

“Large differences in energy supply costs between summer and winter will be a feature of the market, until we see more investment in battery storage capacity," Mr Durham said. 

The price of wholesale gas in Europe for this summer rose in the latest session, meaning that the war in Ukraine will see no let-up in energy prices this year.

Better news for motorists

There appeared to be better news for motorists as the price of crude oil plunged below $100 a barrel. 

Disruption to the European economy remains widespread. 

The war could cost Europe’s carmakers the production of hundreds of thousands of vehicles, and put as much as 15% of output at risk, because Ukraine is a key source of wire harnesses that power car electrical systems.

The shutdown of wire harness plants in Ukraine may lower output by as much as 700,000 vehicles in the first and second quarters, one analyst warned.

Car giant Volkswagen said the war has clouded its prospects for this year. The second-largest carmaker in the world said the lack of wiring harnesses from Ukraine has overtaken a shortage of semiconductors as its biggest supply chain headache.

Rising raw material costs will drive up prices for both electric and internal combustion engine vehicles, Volkswagen chief financial officer Arno Antlitz said, with everything from batteries to catalytic converters set to become more expensive.

In light of rising instability in Europe, boosting sales in China, where Volkswagen currently has 16% market share and aims to double battery-electric car sales this year, is an even higher priority than before, CEO Herbert Diess added.

"The war in the Ukraine has put our existing outlook into question," Mr Diess said, warning commodity markets are likely to remain volatile until 2026.

H&M sales

Meanwhile, fashion retailer H&M reported a 23% rise in first quarter sales. However, shares in the world's second-largest clothing retailer fell as analysts focused on the potential impact of the Ukraine crisis on its business in Central and Eastern Europe and wider global repercussions.

Elsewhere, Maersk's decision to leave Russia will be expensive, but it’s the right call from both a moral and financial point of view, the transport giant’s outgoing chairman said.

“Russia will face many, many years of challenges,” Jim Hagemann Snabe said. The country is set to face long-term difficulties as former trade partners find alternatives to Russian energy and wheat exports that will remain in place long after the war ends, he said.

• Additional reporting Reuters and Bloomberg