The Electricity Supply Board’s (ESB) chief financial officer has played down the prospect of further energy price reductions for customers in Ireland, suggesting there was currently a floor on natural gas prices in Europe because of the increased reliance on liquefied natural gas (LNG) which is keeping retail prices elevated.
Europe has increased its reliance on imported LNG since Russia’s invasion of Ukraine but it faces competition from Asia.
“If the geopolitical situation changes or if demand changes for LNG in Asia, who knows maybe prices could soften further but (at the moment) there appears to be a bit of a floor around wholesale gas which probably means we’re unlikely to get back to pre-crisis retail prices in the short term,” Paul Stapleton said.
He was speaking as the ESB group announced interim results for the six months to the end of June, which showed the State-owned energy utility saw a fall-off in revenue and profit as lower energy prices internationally led to lower energy margins in its generation and trading business.
While energy bills for the customers in the Republic have come down in tandem with the recent moderation in wholesale prices, they are still up to 80 per cent higher than they were before the pandemic.
Because the State imports 50 per cent of its energy needs via imported natural gas, energy bills here are strongly linked to international gas prices.
“Longer term when we move to a more renewables-based energy system the price of electricity will decouple from the price of gas and then potentially longer term we could see a moderation in prices but that’s probably in future decades than future years,” Mr Stapleton said.
He said the ESB’s retail arm Electric Ireland, which has cut prices three times in last 15 months, would continue to keep prices under review and “it has and will continue to pass on wholesale price reductions”.
“But right now wholesale prices appear to be stable. The market analysis at a global level suggests that the price of gas in Europe is underpinned by the global market for LNG, so we’re not seeing significant falls in wholesale prices in the short term,” Mr Stapleton said.
The company’s latest results show operating profit at ESB Group fell by more than a third in the first half of the year as energy prices internationally continued to fall.
ESB said its revenue fell from €4.9 billion to €3.7 billion year on year. Operating profit for the first six months of 2024 was €446 million, down 34 per cent or €230 million from the same period in 2023. Profit after tax was €171 million, and earnings before interest, tax, depreciation and amortisation were €883 million, down from over €1 billion a year earlier.
The group attributed the decline to lower energy margins in its generation and trading business as prices continued to stabilise following the volatility of 2022 and early 2023.
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The interim results also include an exceptional provision of €135 million related to the Neart na Gaoithe offshore wind project, due to construction delays.
Mr Stapleton said the performance for the first half of the year was a reflection of more stable global energy markets. “The significant softening of wholesale market prices has reduced the level of profitability in our generation business in both Ireland and the UK compared to the same period last year,” he said.
However, increased profits from our networks’ businesses, reflecting the continued substantial investment in those areas, provided resilience to the Group position and a robust overall performance,” he said.
The organisation continued to invest in infrastructure, spending €751 million during the first six months of the year. The bulk of this was in electricity network infrastructure under agreed regulatory programmes.
About six Gigawatts (GW) of grid-scale renewables have now be connected to Ireland’s electricity grid, including more than 1GW of solar PV generation. ESB has also connected 1GW of storage, and continues to invest in decarbonising the electricity system.
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