Why are energy prices rising sharply?

yesterday Electric Ireland has announced plans to raise electricity and gas prices from November – Only three months after the last price hike.

It’s the latest company to increase energy costs more than once this year — meanwhile, Energia has announced three separate increases, with Pinergy and Panda Power reporting four.

So why are energy prices so high?

The Big Picture

It may not provide much comfort to know, but rising energy prices isn’t just an Irish problem.

Everywhere from Europe to the United States to Asia is dealing with higher prices – and all because the wholesale prices for gas are skyrocketing.

Since the start of the year, wholesale gas prices are up 135% – 38.5% higher in the last month alone.

This is inevitably paid to the end consumer, which is why everyone’s energy bills are increasing.

Supply and demand

Of course, prices don’t tend to move wildly for no reason, and there are a number of factors behind the shift in the energy market.

For example, the recent heat wave in Asia saw an increase in energy demand there to run air conditioning units.

At the same time, the industry experienced a faster recovery from the epidemic than expected, which means that demand from this sector was also higher.

To try to better manage its energy supply, especially in the run-up to winter, Europe always has large supplies of gas. However, last year’s cooler weather – followed by a cold snap in April – reduced this store and has yet to be replenished.

It is now estimated to be about 16% lower than normal.

And while that usually results in oversupply, that’s not a possibility this year.

Some of the vital gas fields and stations supplying the region were off-line for maintenance, which reduced the amount of gas flowing from Russia to Europe.

A severe problem for Ireland

While this is an international problem, the nature of Ireland’s energy supply makes the country particularly vulnerable.

More than half of Ireland’s electricity is generated from gas-fired plants – which means higher gas prices have a disproportionate impact on the cost of electricity here.

Ireland also tends to rely on the East-West Electrical Interconnect for some of its electricity supply, but with the UK market facing its own price pressures, this doesn’t do much to help the market at the moment.

The country’s growing wind farm infrastructure could help offset rising fossil fuel prices, but calmer weather in recent months means supply there is also low.

Meanwhile, two Irish power plants are currently out of service, which has also put pressure on market supply.

what can he do

There is not much Ireland can do to alter the trajectory of global wholesale gas prices – which means higher prices are inevitable for consumers here.

In the long run, the hope will be that better infrastructure for renewable energy will make the country less dependent on the price of gas.

But in the short term, consumers are advised to shop to make sure they get the best possible price.

While all the major energy companies raised their prices, some made bigger changes than others.

According to comparison site Bonkers.ie, the price hike for some companies will add around €800 to your average annual household energy bill.

Others – including Electric Ireland – may see a change of close to €330 per year.

Aside from getting the right provider, consumers should also take the opportunity to review their energy use at home – to make sure they don’t waste money in the coming months.