Electricity prices set to fall further due to high gas stocks

Electricity prices could fall further this year, easing the burden on families and employers, experts say.

Suppliers cut charges in autumn following two years of sustained hikes that trebled families’ electricity bills to as much as €4,000 a year.

Consultants Cornwall Insight believe that wholesale prices could drop more than 18 per cent this year on the back of high stocks of European natural gas, the fuel that sets electricity prices.

The firm’s latest assessment of the all-Ireland market says those charges could fall to about 18.66 cent a kilowatt hour (KWh), the unit in which electricity is sold to homes, between July and September this year.

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Cornwall predicts that they could dip further to 15.25 cent a KWh in the final three months of 2024.

[ Dublin still has highest electricity prices of all EU capitals despite latest fall ]

Those prices were about 28 cent a KWh a year ago, according to some calculations.

Wholesale prices have no direct impact on household bills, as suppliers buy the electricity they sell to customers months ahead.

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However, sustained falls in market prices ultimately feed through to what suppliers pay under the hedging contracts that set the charges at which they sell electricity to homes and small businesses.

Natural gas prices determine electricity costs as the fuel is used to generate much of what is used in the EU while it acts as a back-up to intermittent renewable supplies.

Cornwall points out that European stocks of the fuel are strong this winter, implying that less will be needed to refill stores this summer.

“With the EU’s boosted gas reserves cutting prices, it is hoped this will lead to a much-needed reprieve for households and businesses who have been struggling with a cost-of-living crisis,” said Sarah Nolan, senior modeller at Cornwall.

[ Cost of living crisis: Have we reached peak prices? ]

On Tuesday, natural gas was trading at 76.45 pence sterling a therm – the unit in which it is sold – in London. A year ago it sold for about 207p.

Europe has replaced imported Russian gas with increased shipments of liquefied natural gas, easing pressure on supplies that drove up already high energy prices when the Ukraine war broke out almost two years ago.

While Irish people benefited from a round of long-awaited energy price cuts in the autumn, families and employers here still pay more for their electricity than they would in Europe.

A recent survey found that Irish people paid 42.75 cent a KWh for electricity in December, almost twice the EU average.

Over the longer term, Cornwall believes prices will fall until 2028, when they will start rising again as electricity consumption increases on the back of State measures to combat climate change.