Why energy prices are on the rise - C103
Since the beginning of the year, consumers have been hit with seemingly never-ending energy price increases.
Our Head of Communications at bonkers.ie, Daragh Cassidy, appeared on C103 to discuss the reasons behind increasing energy prices, the implications on household bills and what’s happening with the PSO levy and carbon tax.
Daragh also discusses how you can offset the price hikes and save money by switching energy suppliers.
Here’s a breakdown of what was discussed by Daragh in the interview.
By how much more could energy bills increase?
There has been a significant number of price increases over the past year. Some suppliers, such as Pinergy, have already increased their prices three times this year alone. Take a look at this blog for a full outline of this year’s price changes from each supplier.
When you take into account the average price increase, the average household is probably paying around €300 extra for their gas and electricity.
This time last year a megawatt of electricity on the wholesale market was going for around €30-40. At one stage over the past few weeks, it went up to over €100. This is a huge price increase.
Hopefully we’re over the worst of it but unfortunately, it’s very difficult to forecast energy prices correctly. As we move into autumn and winter we could see additional price increases.
Why have energy prices increased so much?
There are four main reasons for the increases:
- The price of fossil fuels, such as coal and gas, has skyrocketed on international markets over the past few months as the world economies reopen. Around 60-65% of our electricity still comes from the burning of fossil fuels.
- When it comes to renewable energy, the level of wind output has been down lately as it hasn’t been as windy as expected.
- Renewable energy isn’t free and sometimes people forget this. A lot of investment is needed in the grid and electricity network to cope with the demand for more renewable energy. These costs are then being passed onto consumers.
- Finally, some power plants have been out of action for maintenance reasons.
Powerplants down for maintenance
Two big power plants, Whitegate in Cork and Huntstown in Dublin, are currently down for maintenance. These are both gas-fired power stations.
There are lots of power plants across the country and they regularly go down for maintenance, cleaning and for security checks. However, there's been a bigger number than usual out of action in recent months.
There’s been a few others around the country that have been down as well.
These power plants being shut down happened at the worst time, when the electricity demand was increasing and when there was a corresponding decrease in wind output.
PSO levy and carbon tax
The Public Service Obligation levy, or PSO levy, has been around for about a decade. The main objective of the levy is to support the renewable energy sector.
The PSO levy is paid by all residential and domestic electricity customers in Ireland.
It was over €88 per year last year, but it has been reduced by around €30. The reason why it’s been reduced is due to energy prices going up.
The carbon tax on gas bills will go up this year. It usually goes up by around €7.50 per tonne per year. At the moment it’s €33.50 per tonne. This adds around €80 to the annual gas bill.
There is a commitment for the carbon tax to go up to €100 per tonne. This means that in the future, consumers will be paying around €200 per year in carbon tax alone.
While renewable energy is good for the environment, the transition will be costly.
Shop around for the best deal
Have you seen an increase in your energy bills? You could save a significant amount by switching energy supplier. And the good news is, it’s never been easier!
On bonkers.ie you can see all of the best deals in just a few clicks with our energy comparison tool.
The average household could save around €500 on their annual energy bills by switching to a cheaper supplier.
There are now 14 energy suppliers in Ireland, meaning there’s never been more choice for consumers.
To make the switch, you only need to have a few things on hand:
- A GPRN number if switching gas and an MPRN number if switching electricity
- A recent meter reading
- A good estimate of how much energy you use
- Some personal details
Read our helpful guide on what you need to switch suppliers for further information.
Sometimes you can get cashback offers from suppliers. They may offer you €200-300 cashback which will usually be credited within 30 days onto your first bill. However, often the suppliers that offer a cashback incentive have a higher standard rate.