What’s happening in the energy market? - C103
With all energy suppliers in Ireland increasing their prices at the moment, there’s an energy crisis brewing. Families will see on average an additional €500 added to their winter energy bills. Now more than ever before it’s time to really consider switching energy providers if you haven’t done so already.
Daragh Cassidy, Head of Communications at bonkers.ie, appeared on C103 to discuss why energy prices are increasing, the impact on winter household bills, alternative energy sources and how to save by switching.
Here are the main points and questions answered by Daragh in the interview.
Is there already an increase in people switching providers?
Absolutely, we’ve never been busier. In some ways, this is great since it means people are going to switch and save, which is really important this winter since energy prices have skyrocketed.
When people get their winter bills, it will really hit home. There’s been a lot of price increases announced that have probably gone a little bit under the radar because of summer and because they have been out and about more, so they haven’t been at home as much.
As the darker months close in and we start increasing our energy usage, those extra charges are going to be felt.
Post-Christmas energy bills
The bills after Christmas will really hit people. People tend to get their bills a few weeks in arrears. A lot of people last week would have got their summer bill.
The one that comes around Christmas, particularly around February and even March, which will be for the preceding 7 or 8 weeks. What we often find is that people often get their February and March bills and get a shock, then they switch.
This is a little bit too late because at that stage we’re heading into brighter evenings and better weather. Our advice is always to get switching before the winter months arrive.
Why are energy prices increasing so much?
So there are a few reasons why we’re seeing such steep price hikes.
- Supply chain bottlenecks - Globally in all markets there’s been a lot of supply chain bottlenecks. This is occurring not just in the energy market, but also in the construction and car industries. This is partly due to Covid. There’s a big supply and demand mismatch, particularly with gas. We still use a lot of gas for our electricity supply. When the price of gas goes up, the price of electricity goes up. The price of gas has gone up by about 200-300% in recent weeks.
- Lack of wind output - due to the lack of wind output, there’s been a lack of supply to the grid. That hasn’t helped the current situation because we then need to rely on gas and coal instead, but they’ve been increasing in price.
- Power plants out of action - two of the major gas-fired electricity power plants have been out of action due to maintenance. These usually supply around 15% of our electricity, so that means there’s been less electricity generated into our grid.
It seems as though everything that could go wrong has gone wrong and all of these factors have created a perfect storm.
Take a look at this blog for a more detailed explanation about why energy prices are on the rise.
Offshore wind farms
This lack of wind output has shed light on the fact we need more offshore wind farms, as it’s much windier at sea than on land. There’s usually always a breeze out at the sea, even on the nicest of days. We need more sea-based wind farms since almost all the wind farms we have at the moment are on-shore.
We also need to invest more in solar energy. Given the new technology, it doesn’t actually need to be particularly sunny, especially between the months of April and September.
We should also look at biofuels, renewable gas and things like that.
We’ve put all our eggs in one basket with wind energy and this energy crisis has shown that we need to diversify our energy sources. It can’t just be about wind energy.
What about hydropower?
Hydropower is definitely another potential solution. Iceland is big on hydropower and gets almost 100% of its electricity from renewable sources, so it can work. Iceland has been doing this for over 100 years.
Here it’s not something that the Government seems to have gone after. We’ve concentrated more on wind and solar.
Can people still save by switching supplier?
Yes, there's still value to be had by switching. There are 14 energy suppliers in the market at the moment, which is a lot.
People always ask what the point of switching is if everyone is increasing their prices, but to get business all the suppliers offer big discounts for one year to new customers. If you switch today you can get a discount of around 30-40% off standard rates.
This is a huge discount and could save you around €500, which is badly needed this winter. Even by switching, people probably aren’t going to have lower bills than last year because of the price increases. However, by switching you could still help mitigate this year’s price increases.
A closer look at the price increases
Some price increases that have been announced will add around €700-800 onto bills though. Some of the bigger suppliers have been able to hedge their bets a little bit more.
Electric Ireland has increased prices by around €160. It will likely announce another price hike shortly, but Electric Ireland has to be commended for holding out for so long. With Bord Gáis Energy, there will be around €500 added to the average annual household bill and with SSE Airtricity it’s around €300. Some of the other suppliers, such as Energia and Flogas, their increases could add around €700-800 to bills.
Quite often when people are a little bit concerned about their bills and you delve into it you’ll find they haven’t switched in years and they’re paying top tier standard rates.
I’d advise listeners to look at bills, see what you’re paying and ring up your current supplier to ask for a better discount if you don’t want to switch. Usually, the best deals are reserved for those who look to switch.
Have all energy suppliers increased their prices?
All 14 energy suppliers have increased their prices. They’re all getting their energy from the same palace at the end of the day, so no one is immune to this.
When you get your bill, have a look at it and see where the money goes and you’ll see that the supplier doesn’t take a lot.
- A lot goes on the fuel cost, which the supplier doesn’t get. This is around 40-50%.
- Around 30% of your bill goes to Eirgrid and Gas Networks Ireland who operate the gas and electricity networks.
- Around 20% goes towards tax.
- Less than 10% goes to the supplier, so it’s not a huge amount.
Can you switch every year?
Yes, you can absolutely switch every year. You can always go back to your original supplier if you want after a year. Sometimes Irish people have an affinity with certain companies or brands.
Pressure on the network
There’s so much tax on petrol and diesel that it will still be cheaper to have an electric car, although they do cost a lot to buy in the first place.
There are concerns that we’re trying to put too much pressure on the network with the electrification of our public transport system. We’re also moving our heating systems from gas to heat pumps and moving from fuel-powered cars to electric cars.
We’re putting so much demand on the electricity network that there are now threats of blackouts. There’s also the issue around data centres too.
There’s going to be big upwards pressure on electricity prices over the coming years, it’s not going to get much cheaper within the next 5 or 6 years. We already have around the fourth most expensive electricity in the EU, so this is something that households have to deal with.
Possibility of blackouts
In terms of blackouts, I don’t think we’ll see any this winter. Eirgrid has to be very, very conservative and it’s their job to highlight shortcomings.
Eirgrid is warning that if we keep on this current trajectory of connecting data centres, that maybe within 3-5 years we could be looking at some tight winters. Eirgrid is entitled to give the worst-case scenario, which I think is what’s been done.
Despite this, it’s always a good idea to have a few torches and candles around the house anyway!
Power plants out of action
Those two gas-fired power plants that are out of action are really the biggest concern this winter. One is in Cork and one is in Dublin and as mentioned before, they provide around 15% of our electricity.
They’re due to come back on stream within the next 3-6 weeks. If and when these come back on, it will help things a lot this winter and reduce the threat of blackouts.
Switch and save today
Are you worried about the increasing cost of energy? You can easily compare and switch to a cheaper supplier today on bonkers.ie.
It’s quick and easy to switch and can all be done on bonkers.ie in the space of a few minutes. Use our energy comparison tool to compare the best deals today across all 14 energy suppliers nationwide.
You will only need the following to switch within a few minutes:
- 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.
Before switching, you may also want to take a look at these 7 important things to consider when switching energy suppliers.