Volatile natural gas prices have raised the prospect of energy bill hikes for homes and businesses, although industry figures say there is no immediate likelihood of an increase.
Cold weather in Europe this winter has eaten into the region’s gas stocks, boosting prices of the fuel, which ultimately determines electricity charges.
Gas was nudging 125 pence sterling a therm (the unit in which it is sold) in London on Friday after increasing by 25 per cent since mid-December. They were about 92p this time last year.
Dara Lynott, chief executive of industry body the Electricity Association of Ireland, agreed that his members were watching these developments carefully. He noted that electricity prices could potentially increase over the medium term if the trend were to continue.
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However, Mr Lynott added that there was unlikely to be a short-term threat, as most suppliers have already bought the electricity they are supplying to homes and businesses, insulating it from current developments in the market.
He cautioned that if the cold, less windy, weather that has dominated much of the winter in Europe were to continue, it could lead to pressure later in the year.
Less wind than usual has limited the availability of renewables, adding to the pressure on European gas stocks.
However, that should ease if those weather patterns were to change, Mr Lynott noted. “We are completely prisoners of the weather,” he agreed.
Mr Lynott argued that Ireland’s heavy dependence on natural gas, which generates about half the electricity used here, was part of the problem.
[ Gas consumption hits record levels in DecemberOpens in new window ]
Last week, Cathal Fay, chief executive of leading supplier Yuno Energy, owner of Prepay Power, told The Irish Times that suppliers were keeping the situation under review.
He noted that European natural gas stocks were up to 15 per cent lower than this time last year and were below the five-year average. “The market has been tight and nervous,” he said.
Mr Fay did not believe there were grounds for price increases in the short term. The closure of a pipeline from Russia through Ukraine last month, responsible for about 5 per cent of European consumption, aggravated the situation, despite being widely expected.
Electricity prices are tied to natural gas charges throughout Europe. Reports at the weekend indicated that inventories of the fuel were lower than the 10-year average.
That could have a longer-term impact through the year, as if the trend were to continue, it would also boost demand through the summer as the continent bids to replenish stores.
Russia supplied up to 40 per cent of European demand for natural gas before it invaded neighbour Ukraine. The continent has since increased purchases of liquefied natural gas (LNG), which is shipped rather than piped.
However, it competes with other markets such as China and southeast Asia for supplies of this fuel.
Ireland has no gas storage or LNG facilities and relies on supplies from the Corrib field off the Mayo coast and imports from the UK and north sea via the Moffat interconnector, which connects the country with Scotland.
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