GAS and electricity bills could stay higher for longer this year as January’s cold snap and the latest twist in the Ukraine war take their toll.
Russia’s invasion of Ukraine almost three years ago put paid to an era of cheap wholesale gas and electricity prices across Europe.
Plentiful amounts of Russian gas flowed down the pipelines from Siberia into western Europe. Russia’s gas company Gazprom even became a household name from its sponsorship of the UEFA Champions League.
Cheap Russian gas also kept a cap on the bills paid by households across Europe, including in Belfast and Dublin even though natural gas supplies here are much closer to home.
For the first time since the 1970s, energy cost increases surged and pushed up consumer prices of all sorts of goods.
European governments struggled ever since. Power stations across Ireland were more exposed than most.
The all-Ireland grid meshes the electricity generated by power stations from Larne to Cork to meet the demand for industry and households across the island.
Power generators here depend for the most part on gas to fuel their turbines.
At the start of the invasion, wholesale gas prices on European markets spiked to the once unthinkable level of €300 per megawatt hour.
Before the February 2022 invasion, Europe had been paying as little as €10 for its Russian gas supplies.
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Surging wholesale costs were swiftly passed on to households and businesses in their electricity and gas bills.
Huge efforts led by the European Union to build winter gas reserves helped in time to calm market prices. Imports of liquefied natural gas, or LNG, helped matters.
Governments got lucky with the weather. Relatively mild northern European winters suppressed demand for gas for heating, while seasonal Atlantic winter storms drove wind farms in Ireland and Britain and across the rest of western Europe.
By last February, the second anniversary of the invasion, the price of the wholesale European gas had fallen sharply to €30 per megawatt hour.
As part of an economic war, the EU had placed sanctions on Russian oil but the continent was still not fully weaned off Russian gas.
To the surprise of some, some gas kept officially flowing from Russia into Europe via a longstanding pipeline through, of all places, Ukraine.
Kiev refused to renew the transit deal this month and the price of European gas spiked higher in recent days.
The move was widely seen as an attempt by Kiev to strengthen its hand in any negotiations should incoming President Donald Trump carry through on his campaign pledge to bring a swift end to the war.
Lisa Foley, principal consultant at energy consultancy Cornwall Insight, says gas storage levels built up across Europe over the last three years helped put some sort of cap on winter wholesale gas prices.
But the recent cold snaps, along with the scrapping of the transit deal, will likely mean that the price for wholesale gas could stay higher than once thought, Foley tells The Irish News.
The cost of generating electricity was due to fall this year. There can be a direct relationship between the cost of electricity and wholesale gas prices, and Cornwall Insight is preparing its latest forecasts for 2025, she cautions.
Capital Economics, a consultancy firm, also points to the key role played by the sharp release of European gas reserves in controlling sharp increases in wholesale gas prices.
News that Ukraine did not renew the gas transit deal with Russia pushed European natural gas prices to levels last recorded in October 2023, the consultancy says.
It forecasts that wholesale gas prices will nonetheless still fall by the end of next year, helped by those imports into Europe of LNG supplies from global markets, including from the US and Qatar.
There can be a knock on effect on electricity prices when the wind doesn’t blow at this time of year.
The same calm weather conditions that make for clear skies and frosty days and plunging night time temperatures means there is little wind from the Atlantic to drive turbines.
EirGrid, the power network company, had trumpeted that almost half of all the electricity demand for electricity in the Republic in December was met by so-called renewable energy sources such as wind farms, solar and hydropower.
January is unlikely to be as favourable for wind generation, however.
As the wind calmed last week and temperatures plunged, prices on Ireland’s wholesale electricity market spiked at one stage to a level that triggered a technical alert over available generating capacity.
Households and businesses will be looking to see whether sharp cuts in their utility bills could be delayed.
