Energy security26 Sep 2021 20:54
Supply and demand: What's behind the surge in Irish and European energy prices this year?
Demand for gas and electricity has surged this year as economies reopened and businesses ramped back up.
Sunday 26 September 2021 00:06
Well over half of Ireland’s electricity is powered by gas at the moment.
This poses two immediate difficulties in the run-up to winter — the first is the skyrocketing cost of natural gas across the world.
Demand for gas and electricity has surged this year as economies reopened and businesses ramped back up following the disruption of the past 18 months or so.
One of the normal rhythms of gas is that that there’s higher demand in the winter, so the price goes up and there’s lower demand for gas in the summer, so the price goes down,” explains businessman Fintan Whelan, former corporate finance director at Airtricity
The guys who own gas storage capacity wait until the summer to stock up at a low price. Then they release that gas to the market during the winter when the price goes up and they live on the difference.”
The trouble this year, however, is that demand for gas didn’t decline this summer and neither did wholesale gas prices.
Inventories have been drained because of the lack of a “storage buffer”, Whelan explains.
At the same time, European energy supplies have been constrained due to a host of problems.
For example, low wind speeds have forced European utility companies to fall back on coal, “depleting stockpiles of the dirtiest of fossil fuels“, as Bloomberg reported earlier this week.
On this side of the Irish Sea, many of these factors have conspired to push electricity, fuel and gas prices up by around 19.6% in the year to the end of August, the Central Statistics Office showed recently.
The problems have also been compounded by another issue — the temporary closure of a pair of vitally important gas-fired electricity power stations: Bord Gáis-owned Whitegate in Cork and Energia-owned Huntstown in Dublin.
These two stations have been shut down for maintenance most of 2021 due to what the national grid operator, EirGrid, described as “unexpected and significant failure of equipment.
The closures have been blamed for short-lived electricity supply shortfalls in recent weeks that resulted in the issuing of two separate amber alerts by the Single Electricity Market Operator (SEMO).
Concerns have been raised that such shortfalls could snowball, resulting in blackouts and power cuts over the coming months as more demands are placed on the grid.
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