There is no respite from sky-high Irish electricity bills this winter as the question remains whether Russia will shut off gas to continental Europe, according to prices in the wholesale gas futures market.
Relief this week that Russia was resuming supplies to the EU after a 10-day downtime to maintain the vital Nord Stream 1 pipeline was short-lived and prices continued to trade at elevated levels.
Ireland gets about a quarter of its gas supplies from the Corrib field off the coast of Mayo and most of the rest from the North Sea via interconnectors with Britain. The island therefore does not directly tap gas supplies flowing west from Russia by the Nord Stream 1 pipeline.
But Irish analysts and business leaders have long warned that Irish energy bills are nonetheless directly linked to what happens with Nord Stream 1, as the wholesale market prices paid here still depend on the volume of gas flowing through the important continental pipeline.
As of Friday, Irish electricity bill futures markets were still flashing red this winter. Continental European wholesale gas for delivery in October reached €164 per megawatt per hour, a price level unthinkable before the February 24 invasion of Ukraine. However, the October price was lower than the €184 per MW per hour reached last week at the height of fears over Nord Stream 1 deliveries.
Worse, wholesale gas market prices show little change for winter 2023, with the average delivery price only slightly lower at €161 per MW per hour.
However, there could be some breathing space for the pan-Ireland electricity grid as long as the winds are strong this winter. In some winter months, wind turbines can account for around half of the electricity generated in the grid.
But government, grid operators, households and business leaders will not want to rely on Atlantic winter storms to ensure the island’s energy security should the economic war between the West and Russia over noble gas supplies flare up again.
Gas powered power generators from Larne to Cork are used most of the year to generate electricity, keep lights on, heat offices and homes, power the large number of pharmaceutical manufacturing plants and data centers and keep businesses open and keep the economy going.
The economies of Europe and the US have already been hit hard by the unleashing of inflationary forces triggered by gas, oil and food price hikes in the wake of the Ukraine war.
On Thursday, the European Central Bank responded with its first rate hike in over a decade, with more hikes likely.
There was also a distress signal from European manufacturing on Friday that could point to an industry-led recession, with the so-called flash results of the Purchasing Managers’ Survey showing a sharp contraction at factories this month.
Andrew Kenningham is Chief Economist for Europe at Capital Economics
“The eurozone is on the brink of recession,” said Andrew Kenningham, chief economist for Europe at Capital Economics, of the manufacturing survey results.
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