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Outlook - January 2014
There are two major pieces of news this month for Irish readers. Firstly Ireland’s adoption of the EU
Energy Efficiency Directive (2012/27/EU) obliges companies with annual turnover of more than €50
million or more than 250 employees to undertake an energy audit by the 5th December 2015 and
repeat every 4 years (or indeed implement ISO 50001).
Secondly, under the Energy Efficiency Obligation Scheme (EEOS), electricity suppliers are now
obliged to achieve 1.5% new energy savings per year until the end of 2020, or opt into an expensive
buy out. This means that 2015 will see suppliers bid to buy the credits for energy efficiency projects
which will help reduce the cost of these projects. However at least part of the cost of this scheme
will be passed back to customers.
New CHP installations as well as Led lighting retrofits are in particular being pursued by suppliers as
the credits are easy to calculate. Contact us at SmartPower for more details.
Energy Markets Outlook
Energy prices have been down trending sharply over the past month due to a number of factors –
chiefly among them the oil price breaking below $60 a barrel with the Saudis refusing to cut
production, and talking the market down by stating they would not cut production even if the price
fell to $20 a barrel. Rumours of a secret deal between the US and the Saudi’s to keep up pressure on
Russia’s finances may be a factor. It is also possible the Saudi’s may be trying to discourage some of
the new production projects underway (see LNG comments below).
Barring an unexpected sustained cold snap or sudden serious supply disruption we do not expect to
see a sustained rally in gas prices. However, there are some hints a short term corrective bounce is
likely soon. Lately we are seeing front page headlines in the media such as RTE detailing the oil and
gas price drops. Experienced traders know that this is usually a sign of a bottom in the market as the
media are typically the last people to join the party and like to report the trend just as it is coming to
an end. Some well know commentators such as T. Boone Pickens are predicting that the oil price will
rebound to $100 a barrel in the next 12 to 18 months. Pickens also said he expects OPEC will
eventually move to slash oil production, possibly in the first half of 2015.

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Natural Gas
Gas prices continue to fall and stocks remain at high levels (UK storage is at 85% full). LNG cargoes
arriving in the UK have helped push day-ahead prices down by almost 10% since mid-Dec.
In the medium term a LNG glut has been predicted by some market observers as a result of new
production from Australia and the start of US exports to Asia just as Asian demand appears to be
falling off. Sources suggest a 75% rise in LNG supplies this year and 11% the next.
The big risk that we were concerned about late last year - an overt military action in Ukraine during
the coldest part of the winter and cutting off their gas pipeline through to Europe now looks
unlikely.
Historically, gas commodity prices hit a low of less than 1c/kWh in the late summer of 2009.
Summer 15 prices closed yesterday at 43.5p/Therm equivalent to 1.8c/kWh. (see graph next page).

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Irish Electricity
Some 50% of electricity in Ireland is made with gas fired generation and indeed the graph above
indicates the strong correlation between gas and electricity prices. However, when electricity drifts
down towards the 4 to 5p/Kwh, non- gas fired power stations become the marginal price maker
effectively acting as a floor on the price. Despite last month’s dramatic drop in gas prices, we are
seeing support at current levels, around 6c/kWh (it’s also Winter). As we mentioned last month,
these are the conditions that users with Combined Heat and Power (CHP) units will make much
higher operating surpluses. Contact us at SmartPower if you help with schedule adjustments to
optimise your CHP financial performance.

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Currency Outlook
This past month the euro has been under a great deal of pressure moving down to its lowest level
since March 2006 against a backdrop of the ECB threatening quantitative easing (money printing) &
concerns about Greece again. Broadly speaking, traders are expecting EURUSD to continue lower to
the next support level 1.1640 ( Nov 2005 low) and probably continue to weaken going forward with
the usual corrective bounces along the way.
Of most interest to Irish energy market participants is the effect this will have on Irish gas prices via
the knock on effect from the EURGBP level. This currency pair has not really broken down against
the euro as sterling has also been acting very weakly against the dollar over the past few weeks. We
will be keeping a close eye on this for signs that sterling will break away from euro down to levels
around 0.7740 and lower.

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About SmartPower
Our range of activities include;
Review current contracts to make sure your business is tied into the lowest cost connection level
agreement.
Making comparisons between tracker and fixed electricity tariffs more transparent, so better
procurement decisions are made.
Providing daily/hour gas price updates on the forward markets, so that gas & electricity prices can be
hedged forward at competitive rates.
Scheduling load to use lowest priced times and switch off non-critical load during high cost periods.
Allowing a (non-critical) portion of the electricity profile to be switched off or an on-site generator
started remotely by the National Grid (via an aggregator known as a Demand Side Unit) allowing you
to receive capacity payments in compensation. This is also applicable to sites with a Diesel
Generator.
Providing an independent expert review and paybacks of energy saving capital projects, including
wind turbines, led lighting retrofits and solar photovoltaic panels.
For CHP owners, access market information to optimise run hours so that power is imported
(purchased) when the import cost is lower than the running costs of the generator, and if there is an
export potential, then better returns can be invariably be obtained using a time of day tariff model.
See www.smartpower.ie for more details. If you have any questions please contact me at
peter.brennan@SmartPower.ie or on 086 8402190. Naturally, please feel free to forward on the
newsletter to anybody who has an interest.