Energy costs tumble for Irish businesses as wholesale gas prices halve

THE COST OF energy has dropped for Irish businesses as the price of wholesale gas and electricity continues to tumble.

According to the monthly business energy report by Irish gas and electricity supplier Vayu Energy, wholesale gas prices have nearly halved in the past year.

The company said that so far in September, the average day-ahead price for gas is 1.06c/kWh (cents per kilowatt-hour). The price refers to contracts for gas delivery tomorrow.

This compares with an average price of 1.92c/kWh a year earlier. Irish wholesale gas prices are a staggering 52% lower in euro terms compared with the average monthly price recorded for the month of September over the last three years (2013-2015).

Vayu noted that this has had “a significant impact for lowering the energy costs of many Irish businesses purchasing gas on the wholesale market; particularly for users in the industrial and commercial sector.”

Wholesale gas prices are down 13% month-on-month, which the company said is likely due to the ongoing healthy supply in the market, decreased demand year-on-year and a stronger euro to sterling exchange rate.

More price pressure

The drop in gas prices also meant a reduction in the wholesale cost of electricity, as gas is the main energy source used to generate electricity.

Wholesale electricity prices have also dropped sharply and so far in September have fallen by 30% year-on-year and 5% compared with last month.

Gas pipelines

Senior energy analyst at Vayu Joanne Daly said she expects more downward pressure on Irish energy prices due to plenty of available gas in the market and mild weather.

“Temperatures are expected to be above normal in the UK and throughout most of Europe during the last week of September,” she said.

“Weather forecasts are also signalling strong winds for the same period. These point to a period of continued low gas demand for the remainder of the month, which could keep a cap on any potential gains due to supply issues.”

Cost of oil

Oil prices are also still at low levels, further contributing to the downward pressure on the value of wholesale gas as many contracts for gas are benchmarked against oil.

Crude oil is currently trading at about $45 a barrel, less than half its value towards the end of 2014, when crude was trading at around $100 per barrel.

Vayu Energy’s report also indicates about a fifth of the state’s total electricity demand since the start of the year was generated by wind energy.

Dublin-headquartered Vayu operates in both Ireland and the UK, and claims to supply one-fifth of the Republic’s largest business users of natural gas. It was recently acquired by Spanish utility giant Gas Natural Fenosa.