What will Brexit mean for Irish energy prices?
With the results of Friday’s vote still sinking in, we consider the possible impact of Brexit on the cost of energy in Ireland.
The result of the Brexit vote is in and it’s a victory for the Leave side, with 51.9% of the vote. What this means in the long-term for Ireland is still uncertain and the picture will only become clear in the coming weeks and months.
However, one potential impact of the result could be on Ireland’s energy supply. Minister for Communications, Energy and Natural Resources, Denis Naughten T.D., has agreed that a full assessment will be undertaken of potential issues related to this, including security of supply issues, taking account of current interconnection arrangements, and cooperation with the UK generally with regard to stocks of fuel.
It will also include cost implications and preferences for any new, post-Brexit arrangements between Ireland and the UK. Minister Naughten’s full statement is available here.
As we tend to purchase most of our natural gas from the UK, Brexit could certainly have an impact on the cost of energy for Irish customers. The wholesale cost of gas also has an impact on electricity prices, as gas is the main energy source used to generate electricity in Ireland.
Wholesale prices have already dropped significantly this year; in May wholesale gas prices were down 37% year-on-year, with wholesale electricity down 30%1. With a likely fall in the value of Sterling (already down around 8% compared to the day before the result), another drop in the wholesale cost of energy for Ireland is a possibility.
But what does this mean for energy customers? So far this year, we’ve already seen price cuts from some suppliers. However, these cuts have been nowhere close to matching the fall in the cost of wholesale energy, and some suppliers haven’t made any cuts at all.
Another drop in the wholesale cost of energy will have to put pressure on suppliers to pass savings onto their customers - something we called for earlier this year.
In the meantime, the biggest savings can still be made by switching supplier. There is currently a €318 a year difference between the average standard plan and the cheapest deal on the market.
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1 Source: Vayu Energy - May 2016 monthly report