Rising winter energy costs - Midlands 103
You might have heard that the cost of gas and electricity has been rising steadily since the start of the year, with the majority of energy suppliers having introduced at least two price increases, or more, up until now.
All this spells out nothing short of an energy crisis, with a number of different factors all converging to create the perfect storm.
Head of Communications at bonkers.ie, Daragh Cassidy, appeared on Midlands 103 to discuss the current energy crisis and the effect rising energy costs will have on consumer’s bills this winter.
Here’s an outline of the main points discussed by Daragh in the interview.
Why are energy costs rising?
There are four main reasons for the energy crisis and rapidly increasing prices:
- Fossil fuels - The price of gas and oil and coal on wholesale markets has skyrocketed over the past few months. The price of gas for example has increased by over 200%. And that’s sneaking through not only to our gas bills but also our electricity bills because we still generate a huge amount of our electricity from burning gas, and to a lesser extent coal.
- Inadequate weather conditions - It hasn’t been as windy in recent months as it usually would be and that’s also put pressure on the network. According to the World Climate Service, June and July of this year was one of the least windy periods on record in Ireland.
- Gas-fired power plants - The closure of two large gas-fired power plants has put pressure on prices as it’s reducing the supply of electricity into the grid.
- Covid19 - The pandemic also has its part to play and has created a whole host of issues to do with supply chains in both the energy market here and worldwide.
The upcoming budget and the energy crisis
The carbon tax could be one of the more controversial issues because at the moment it adds around €80 the average annual gas bill, and then we have the PSO levy on electricity bills which adds around €60 a year.
When you look at the rapid increase in prices that we’re seeing, it’s almost like 10 carbon taxes being added to bills so some consumers and households might say ‘are we not already paying enough?’
Since the start of the year most suppliers have raised prices two times, some three times, and there are two or three suppliers that have actually raised prices four times; it’s absolutely unprecedented.
On average households are going to be paying an extra €400 - €500 a year. Some customers of some suppliers will be paying maybe €700 - €800 more a year for their energy when these price increases all come into effect.
This is a huge amount of money so customers will be saying, ‘hang on, why are we increasing the carbon tax again and adding more money to people’s bills?’
So I think there’s going to be a lot of calls on the government to help households, and not just through social welfare (although social welfare should be very, very targeted) but I think there are a lot of people who are outside of the social welfare net who might struggle to pay their energy bills this winter and they’ll be looking for some help as well.
Will there be a reduction in tax to help those susceptible to rising energy prices?
The government sometimes likes to conveniently forget just how much tax adds to the cost of living.
The carbon tax adds around €80 a year, and it’s due to go up by another €17 meaning it would add close to €100 to the average annual gas bill. The PSO levy adds around €60 a year, and then VAT adds €300 - €400 on average to household bills.
So when you add that up the government tax take is relatively high so I would be calling on the government to look at that first and foremost. There’s been talk of energy price caps but I think that could actually cause other issues by maybe putting suppliers out of business, which we don’t want.
I think a quick and easy way for the government to help households this winter is to reduce the tax take. That’s what they’ve done in Spain, slashing the VAT rate on energy bills for the winter period.
An energy tax credit could also be introduced to help alleviate the problem for consumers and help with bills.
Potential power outages this winter
One thing we have managed quite well over the decades is our energy and the Irish energy grid is quite strong.
The potential for blackouts is unlikely, but we could come close and it’s closer than it has been in decades. We haven’t seen widespread blackouts in Ireland for thirty or forty years, however, this winter we could come very, very close.
There has already been talk about importing generators into Ireland to try and meet capacity in the short term, but procurement issues meant that couldn’t go ahead. But certainly the Commission for Regulation of Utilities (CRU) and EirGrid are looking to next winter to import excess generating capacity into the system.
Some warnings have also been issued by the grid operator, so-called ‘Amber Alerts’, which, in the past, would only have been issued perhaps once every year, or slightly less. However, since the start of this year there have been several so that shows you how tight the grid is at the moment and that’s another concern as well.
A short term phenomenon?
A big issue at the moment is that the gas-fired plants are down, as mentioned previously. They usually produce around 15% of Ireland’s electricity so them being down has really reduced capacity. It’s hoped they’ll come back on stream over the next few weeks which should ease pressure slightly.
However, in the short to medium term there are demands on the grid that aren’t going to go away, and particularly as we try to move towards renewable energy. There is going to be that period of five to six years where things are going to be tough.
While the chances of widespread blackouts happening or suppliers going out of business are slim, the issue of increasing energy prices and pressure on the grid isn’t going to disappear.
There is of course also the issue around data centres. It’s projected that the energy used by such facilities will use around 30% of Ireland’s entire electricity supply which is a huge amount and will put upward pressure on prices too.
Diversifying renewable energy sources
We need to look at this as an option. As we move towards decarbonising the electricity grid and economy, we can’t just rely on wind, and we’ve seen evidence of that this year.
Biogas and biofuels are alternative options that need to be considered, as well as more solar energy.
Where wind energy is concerned, we even have a lot of onshore wind farms, so land-based. We need to start looking at off-shore as well, as it’s almost always windy out at sea.
Rising winter costs
Many of the increases are already beginning to feed through and have an impact on what customers are paying.
A lot of people in August and September however will get their final ‘summer’ bill, so when the winter bills arrive in December, January, and February is when consumers will feel the pinch.
This energy crisis has been brewing in the background since we’ve been notified of all these price increases. I just don’t think consumers and households are really aware of it yet.
Unfortunately, as we move into the darker winter months when energy use in the home usually skyrockets, some consumers may be in for a big shock in December and January.
There is one surefire way of saving money on your bills this winter however, and that’s by switching supplier.
Compare energy deals today
If you want to get ahead of the curve and save money on your bills before the colder winter period you can compare the best deals on the market in seconds right now using our energy comparison tool.
Compare the very best electricity, gas, and dual-fuel deals across all 14 energy suppliers nationwide and switch in seconds!
If you’re seeking advice when it comes to switching, have a look at some of our helpful energy guides.
- Here are 7 things to consider when switching energy supplier
- Review the most common questions we get asked about the energy switching process
- Learn about what you need to switch energy suppliers in this guide.
If you are still in contract and don’t want to pay an early exit fee to switch supplier, consider adjusting your habits around the home to reduce your energy consumption instead. Here are 15 ways to use less electricity and save money, and 10 ways that you can heat your home for less this winter.
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