Dip in wholesale gas market unlikely to lead to pre-war prices, says Ryan

A significant dip in the wholesale gas market is “welcome” but is unlikely to lead to a return to pre-war prices for consumers, Minister for the Environment Eamon Ryan has said.

Mr Ryan, who on Tuesday attended talks of European Union energy ministers in Luxembourg on proposals to introduce a cap on gas prices across the bloc, said that moves to fill gas storage capacity in Europe were partially responsible for the dip.

“There’s been a lot of progress, the union has been able to manage its storage, that’s one of the reasons prices are coming down,” he said.

Wholesale prices on the main exchanges fell to levels not seen since before the Russian invasion of Ukraine in February, but Mr Ryan said while this was “very welcome, you can’t expect going back to pre-war conditions any time soon”.

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Mr Ryan said the market could see higher prices especially if cold weather comes, and into next spring when efforts are underway to replenish stocks ahead of the following winter.

He said there had been “broad agreement” on some energy measures, including common purchasing but there “wasn’t agreement on the wider price cap issue, so the Commission will have to come back on it”.

Ministers did not reach agreement during the Luxembourg talks and instead tasked the European Commission to prepare proposals ready for consideration at a November 24th emergency meeting.

A paper on policy options to mitigate the impact of gas prices on electricity bill, produced by the commission, outlines how a cap modelled on one introduced in Spain and Portugal - the so-called ‘Iberian Mechanism’ could proceed.

Officials warned that while a mechanism could be proposed and implemented quickly, several issues remain, including the possibility of cross-subsidising consumers in non-EU energy markets which are interconnected to member states - such as the UK. “Such exports would… reduce the net financial benefits of the measure, as subsidies paid in the EU would in essence reduce power prices for non-EU customers,” Brussels officials wrote in a ‘non-paper’ produced for energy ministers.

There are also concerns that the cap could encourage more gas consumption which would “risk worsening the already difficult situation as regards gas security of supply”. The cost of implementing the measure would also vary across the bloc, with member states with a lot of gas-fired generation of electricity likely to “face the highest costs for the necessary subsidy”.

Ireland is not named as one such state but gas plays a vital role in electricity generation here - especially when the wind is not blowing. Latest figures show at times last month gas powered up to 81 per cent of the country’s electricity generation.

Mr Ryan said he would also shortly bring a memo updating the Government on Ireland’s ongoing membership of the Energy Charter Treaty, an international pact which is often used by energy companies to sue governments who implement anti-polluting measures. France, Spain and the Netherlands have indicated they will pull out of the treaty.

The Green Party leader said it needs reform and there are concerns over whether it is compliant with climate targets. “It is an out of date treaty in my mind which was crafted in a different time and in different circumstances,” he said.

“If it can’t be reformed we shouldn’t be beholden to something that may impede our climate targets.”