BUSINESSES AND consumers could face energy price hikes as a result of Germany’s decision to phase out nuclear power, according to the head of an Irish-based natural gas supply business.
In a U-turn inspired by the Fukushima disaster in Japan in March, Germany yesterday announced plans to phase out nuclear power by 2022 and pledged to increase its use of renewable energy.
Colm Kennedy, managing director of natural gas trading and supply operation Vayu, part of the Glencore group, said the announcement produced an immediate increase in natural gas prices and in stocks related to the renewable energy industry.
“Gas prices will definitely rise as a result,” said Mr Kennedy.
He said this will have a knock-on effect on electricity as fossil fuels and particularly gas are used to generate electricity. A shift to renewable energy would not necessarily cut demand for gas. He said it is a natural hedge for renewable power as gas generators are used to step in when wind farms are not operating, which is about 65 per cent of the time in the case of onshore facilities.
Increased gas resources and better technology for extracting and producing the fuel will help to ease some of the pressure, but according to Mr Kennedy: “all fossil fuel prices are likely to remain volatile into the future”.
However, he argued there would be a flip side. A move away from cheap nuclear power to more expensive fossil fuels and renewable energy would increase costs for German industry and business and blunt some of its competitive edge.
He warned that, as demand for gas is likely to increase over the longer term as a result of the German move, Ireland needs to tackle a number of outstanding strategic issues.
The Corrib gas field, which has enough of the fuel to supply the country’s needs for about 10 years, needs to be brought into production.
Mr Kennedy emphasised that provision needs to be made for gas storage. Ireland as a whole depends heavily on the fuel, and 90 per cent of it comes from the North Sea via Moffat in Scotland.
“There’s no question about it, from an Irish perspective, strategic storage is becoming more and more urgent.”
He said there is a feeling the country might be able to rely on British strategic storage, but stressed that this should not be the case.
Vayu supplies large organisations such as industries and hospitals with natural gas.
