Lack of storage puts spotlight on winter energy prices

Senior Woman Warming Hands By Fire At Home
Gary McDonald Business Editor

NORTHERN Ireland homes and businesses could struggle to keep warm this winter, according to a report by Vayu Energy.

Average prices for wholesale gas in the first six months of this year have been a whopping 42 per cent higher than the same period in 2016.

And with every end-of-year bringing price uncertainty, it is effectively warns people to wrap up.

According to Vayu, the day ahead price last month is only one per cent cheaper than in the same month last year, and June was the first month this year that prices were below last year's levels.

Outlining the reasons for the rise over the first half of the year Vayu said Britain started the with 40 per cent less gas in storage than the previous year following the closure of the Rough Storage facility.

The reduction in gas supplies into Europe caused GB prices to continue an upward trend, peaking at 60.2p in early February.

Brexit negotiations continue to add a another level of uncertainty to the National Balancing Point (NBP), the virtual trading location for the sale and purchase and exchange of UK natural gas.

Vayu energy analyst Keith Donnelly said: “Prices should remain fairly neutral over the next three months, but quarter four is where the real uncertainty lies, and winter 2017 is currently trading more than 20 per cent above the lowest price seen in the last two years.

“We are entering a winter without any gas in long range storage for the first time since Rough became operational over 30 years ago.

"The risk now is that the market becomes nervous and reacts to every change in temperature, demand and supply, causing prices to spike this winter and become more volatile.”

He added: “Electricity prices in the single electricity market (SEM) had a bullish start to the year. Despite strong wind generation in January, prices were 8 per cent higher than the December average.

"The main driving force behind the increase was the rising gas market, with gas fired generators most likely being the last facilities in the SEM to set the System Marginal Price (SMP).

“The market trials for the new wholesale electricity market, Integrated Single Electricity Market (I-SEM), commence in December and it will be interesting to see what prices could look like under the new market."


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