Wholesale electricity prices tumble again in May

Wholesale electricity prices tumbled again in May, continuing a slide that began in January, new industry figures show.

Homes’ and employers’ electricity bills are more than twice what they were two years ago following a sustained crisis brought on by surging demand and aggravated by fallout from the Ukraine war.

Figures published on Wednesday show that average wholesale electricity prices slid 16 per cent last month to €105.19 a megawatt hour (MW/H) – the unit in which power trades – from €125.57 in April.

Adding in network charges, that translates to 20 cent a kilowatt hour (KW/h) for homes and businesses, most of which continue to pay between 40 cent and 50 cent KW/h.

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Wholesale prices have been falling since January while, barring expected increases in November and December, the general trend since last August has been down.

The Central Statistics Office recently reported that they fell 13.5 per cent in April.

Suppliers say wholesale rates have no bearing on household charges, as these are tied to electricity companies’ practice of buying energy months in advance to supply to consumers, which protects their businesses from price volatility.

Irish wholesale prices change every hour. The average published on Wednesday was calculated by industry body Wind Energy Ireland, which drew on data from national electricity grid operator EirGrid and energy trading and services multinational ElectroRoute.

Wind Energy Ireland pointed out that last month’s price was far ahead of pre-crisis wholesale charges, which the organisation said were between €50 and €70MW/h.

The industry group also warned that recent falls in natural gas prices, which determine electricity costs, could “reverse later in the year”.

Natural gas traded at 64 pence sterling a therm – the unit in which it is sold – in London on Tuesday, while contracts for supplies in winter 2023 were £1.04 a therm.

The equivalent prices over the last week in May were 58.08p and £1.08. Prices topped £7 last August as Russian state-owned supplier Gazprom turned off the taps to Europe.

European gas prices generally fall in summer as low demand means the region has high stocks. However, Europe is vulnerable to sharp rises in winter as demand can eat into stocks quickly while supplies are tight.

Irish suppliers are locked into winter 2023 contracts for gas at close to £2.54 a therm, figures recently obtained by The Irish Times show.

Industry figures believe this means the electricity prices paid by homes and small businesses will remain high into next year.

However, electricity companies and economists point out that their “hedging” or forward buying policies saved consumers hundreds of millions of euro at key points in the crisis when prices surged to record levels.

Meanwhile, Wind Energy Ireland reported that good weather cut its industry’s share of electricity generation last month.

The group said wind generated 21 per cent of Irish electricity demand in May, against 34 per cent during the same month in 2022.

Overall, wind met 35 per cent of electricity demand in the first five months of the year. Wind Energy Ireland chief executive Noel Cunniffe noted that “on May 10th, Irish wind farms met over half of Ireland’s electricity demand for that day”.