What is behind the surge in energy prices in Ireland and Europe this year?



WHAT ARE THE main factors behind the rapid acceleration in energy prices in Ireland and Europe this year and why have some commentators raised concerns about a winter crisis?

There really isn’t a single underlying problem to blame for the phenomenon.

If you were to oversimplify, you could say that a mismatch between supply and high levels of demand has pushed energy prices across the continent up, as benchmark European gas prices have in particular tripled this year even before the arrival of winter.

The problems are particularly acute in the UK, where rising wholesale gas prices are forcing energy suppliers to shut down in a crowded market.

But Ireland is grappling with its own problems as winter approaches.

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So what’s going on, what does the government plan to do about it and what impact will it have on consumers?

Rising demand

More than half of Ireland’s electricity is currently powered by gas.

This poses two immediate challenges as winter approaches – the first is the skyrocketing cost of natural gas around the world.

The demand for gas and electricity has increased this year with the reopening of economies and the resumption of activities after the disruptions of the past 18 months or so.

“One of the normal rhythms of gas is that there is a higher demand in the winter, so the price goes up and there is a lower demand for gas in the summer, so the price goes down,” the man explains. ‘business Fintan Whelan, former corporate finance director at Airtricité

“The guys who have gas storage capacity wait until the summer to get their supplies at low prices. Then they release that gas to the market during the winter when the price goes up and they live off the difference.

The problem this year, however, is that demand for gas has not declined this summer and neither have wholesale gas prices.

Stocks were depleted due to the lack of a “storage buffer,” says Whelan.

At the same time, European energy supplies have been limited due to a multitude of problems.

For example, low wind speeds have forced European utilities to rely on coal ”,deplete the dirtiest fossil fuel stocks“, as Bloomberg reported earlier this week.

Meanwhile, Russia is sending less naturally to Europe and supply alternatives have proven to be tricky, with US exports being held back by a series of storms and extreme weather events on the Gulf Coast over the past eight. month.

All of this meant that in August soaring energy costs drastically boosted the euro zone’s inflation figures, helping to push the annual growth rate to 3%, well above the target. 2% from the European Central Bank.

In the United Kingdom, the crisis was amplified by a fire at a key converter station linking the French and British networks. It could take a month for the station to come back online, according to reports this week.

Power stations

On this side of the Irish Sea, many of these factors combined to push up electricity, fuel and gas prices by around 19.6% year-on-year through the end of August, recently showed the Central Statistical Office.

The problems were also compounded by another issue – the temporary shutdown of two vitally important gas-fired power plants: Whitegate, owned by Bord Gáis in Cork, and Huntstown, owned by Energia, in Dublin.

These two stations have been closed for maintenance for most of 2021 due to what the national grid operator, EirGrid, described as “an unexpected and significant failure of the equipment.

The shutdowns have been blamed on short-lived electricity supply shortages in recent weeks, which resulted in the issuance of two separate amber alerts by the Single Electricity Market Operator (SEMO).

Concerns have been expressed that such shortages could snowball, leading to blackouts and blackouts in the coming months as more demands are placed on the grid.

Speaking this week, Environment Minister Eamon Ryan said he did not expect blackouts to be a feature of the Irish winter.

The government expects the factories to be operational again within two months, but Whelan believes the difficulties could continue.

“Ryan has accepted assurances from both operators that they will be back on time,” said Whelan. “Maybe they will, maybe they won’t” but in the meantime, winter is approaching and there is still great “uncertainty” about supply.

Because of this uncertainty, the government has had to find solutions that go against its stated agenda on climate change, says Whelan.

Recent figures from Gas Networks Ireland showed that during peak hours in July, up to 25% of Ireland’s electricity demand was met by coal-fired power plants.

It’s “really disheartening,” says Whelan – especially given the progress made since the 1990s to move away from dirty fuels like coal and peat and towards cleaner fuels like gas.

Renewable energy

Whelan and others believe accelerating the shift to renewables, such as offshore wind, will help secure Ireland’s energy supply.

With the government aiming to have 70% of Ireland’s electricity produced from renewable sources by 2030, experts like Muireann Ní Loisigh – an energy economist at ESRI – agree.

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But offshore wind is not a panacea for all of Ireland’s energy problems.

“The wind obviously only generates electricity,” says Ní Loisigh in the last episode of The Explainer podcast from The newspaper.

And one of the things that people kind of forget is that electricity is just a source of demand for energy. This only represents about 20% of our total energy demand. We still have to heat our homes on our buildings or commercial buildings, we still have to move around.

Overall, she says Ireland needs to diversify its portfolio of renewable energy sources to meet the needs of the economy and as insurance against weather-dependent sources like wind.

Green hydrogen is another type of renewable energy that needs to be seriously considered as a way to improve Ireland’s energy security, she and Whelan believe.

“Ireland is much, much further behind than the UK and Europe on this, but it’s a hot topic in the industry. However, we are not seeing concrete action yet, ”says Whelan.

Ni Loisigh says Ireland’s climate action plan is “somewhat unusual” in a European context given that it emphasizes electricity.

If you look at the Climate Action Plan, there is sort of only one game in town, that is, you shift as much of our transport as possible to electricity, you transfer as much of our heating as possible to electricity. And then you just get the electricity itself to be renewable.

“There haven’t really been a lot of questions on things like renewable hydrogen, maybe we should try to bring renewable gas into our grid? ”

But “there’s no point in talking about more offshore wind this winter,” says Whelan. “There’s no point in talking about adding more interconnectors or even new gas plants this winter.

The immediate question for politicians this winter is how to make the system work without cannibalizing Ireland’s response to climate change.

Winter invoices

In the meantime, consumers are urged to shop around to save money on their utility bills this winter.

Talk to The newspaper This week, Darragh Cassidy, spokesperson for price comparison site Bonkers, also urged consumers to think about how they can save energy to cut costs.

“Install energy saving light bulbs, turn off appliances at night, don’t overfill the kettle… I encourage readers to research and devote a little time and effort to how you can use less energy in the house because it all can add up, ”he said.

The way the energy market works is that all suppliers offer discounts to attract new customers. Just as you change your broadband or mobile operator, the energy market is no different.

“Suppliers offer discounts in the range of 30-40% in the first year to people who switch. You could save around $ 500 per year on your bills.

“With the price increase, this discount will be on a higher price, but it’s still a discount.”


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