1. Page 1
Outlook – July 2015
As I listen to the commentary around the current Greek debacle, I hear a lot of ill informed political
commentary with slogans such as 'Austerity is not working'. So I thought it would be useful here to
talk about what’s really going on as these events can actually have knock on effects on Irish energy
prices via the Euro. The fundamental problem with Greece is that is a low productivity economy.
Basically they don't make much stuff that people want to buy in contrast to say productive countries
like Germany. The latter has the third largest export revenues in the world with Greece a long way
back at number 58. Despite this the Greek public servants retire at a younger age than Germans and
have larger relative pensions with many public sector workers retiring on 80% of final salary. (By way
of interest Ireland is number 32 but has a much lower population than Greece which has 11m
people).
One of the origins of the problem was that Greece entered the Eurozone in 2000 based on meeting
targets for a number of criteria (inflation rate, budget deficit, public debt, long-term interest rates,
exchange rate) but was widely believed to have cooked the books (Goldman Sachs provided the
expertise). Membership of the Eurozone then allowed Greek politicians to borrow lots of money to
pump up public services (thereby buying votes, a practice we have also seen in Ireland) this is
something they would not have had been able to do if they had kept the Drachma as the markets
would not then have lent them so much money. Of course, every spendthrift borrower eventually
runs out of money and financial gimmicks such as cooking the books also have a limited lifespan. For
quite a few years now, other Eurozone countries have push the Greeks to reform but the Greeks
have shown little willingness or appetite to do so with many preferring to look for scapegoats and
imaginary enemies (bankers, German politicians) rather than actually begin the process of putting
the economy and particularly its public sector spending on a sustainable path. To be fair to the
Greeks such reforms are very difficult in a democracy and again we have seen this in Ireland where
even token public spending reforms are met with great resistance.
So where does the Euro go from here? Well nobody knows as this is an event driven market. There is
no 'potent director' out there that can control events and consequently many traders have actually
stood aside as the uncertainty is too high. In technical trading terms the EURUSD chart is in what
traders describe as a 'wedge formation'. This is a pattern that emerges when the market is very
uncertain and waiting on fluid events to unfold. My guess is we get a resumption of the EURUSD
bear trend when the smoke clears with a possibility of the euro reaching parity with the dollar in the
coming year.
Euro weakness implies higher energy prices which is a concern for our current procurement group
strategy. However, in the past few months gas prices have fallen by more than the Euro or Euro
sterling rate and going forward the projections for gas prices are lower. See comments in the
supply section below. So we have two competing forces here - potentially lower euro prices counter
balanced by potentially lower energy prices. This makes it difficult to call the budget certainty versus
the best value debate in choosing our core offering for the procurement group. At this point in time,
our feeling is that the floating rate products are still the best value in the market. Remember if you
lock in prices with STOD rate offers from suppliers then not only do you pay a premium for this but
you also miss out on energy price declines. As a compromise we are looking at some of the hedged
currency priced products for clients who are concerned about the risk of floating electricity rates.

2. Page 2
EUOS – EU energy efficiency directive
The deadline for the EU energy efficiency directive ESOS is coming up fast -5th Dec 2015. However, I
find I am still getting blank looks from many people I speak too in Irish businesses when I mention
ESOS. So for the newsletter this month, I will go over the basics again and try to get the main points
across as clearly as possible. Guidance notes in more detail are available on the SEAI (Sustainable
energy authority of Ireland) website.
Who does ESOS apply too?
Large enterprises with 250 or more employees (on payroll); or any number of employees and an
annual turnover in excess of €50m; and an annual balance sheet total in excess of €43m.
Question - I am a medium sized enterprise (less than 250 employees & €50m in turnover) but part of
a larger corporate group, how do I decide if I need an audit?
The requirement is based on legal entity status. If the business is a standalone Irish registered
company and you don’t meet the criteria on your own then you don’t need to comply. If you are not
registered and but are controlled from a central registered Irish business and collectively they meet
the criteria then you may need to be included. However the audit just needs to cover just 70% of
total primary energy use. The head office for example might account for this 70% and so it would be
just this building or facility that needs the audit.
1. How to comply: completing an ESOS assessment.
2. Calculate your total energy consumption.
3. Identify your areas of significant energy consumption (up to 70% of your total primary
energy use).
4. Appoint a lead assessor (the latter must be on the SEAI register).
5. Submit your ESOS notification of compliance to SEAI by the 5th
December 2015. The audit
must be signed off by a senior internal signatory such as the CEO or another director.
6. Keep records which include 12 months of verifiable data.
What happens if I miss the deadline?
The situation around this is pretty vague. We have been told by the SEAI - 'Although is not absolutely
ruled out, it is considered unlikely that penalties would be made retrospective to December 5th. It is
envisaged however that the penalties would apply to those entities who at the time of the
compliance assessment in early 2016 had not by that stage met the audit requirement obligation'
We have asked for more clarity on this. The penalty amount is also vague but there are some
indications that it is in the order of €5,000 (which would be much lower than the UK £50k penalty).
How much does the audit cost?
At SmartPower we charge €600/day as registered auditors. This rate is discounted for members of
our procurement group.

3. Page 3
Gas prices /currency going forward
It is important to reinforce that important to understand that nobody knows for sure where prices
are going. All we can do is make a directional bet based on the best info we have available. Right
now this suggests;
• LNG imports into the UK are set to see a year on year rise of over 5 BCM in 2015 and more
than 24 BCM in 2016 and as a result gas price projections going forwards have been
falling. Some analysts are predicting gas prices will fall to 40p/th from the current
46p/therm.
• Forward gas prices are declining slightly, up to now these declines have generally outpaced
the rise in Sterling against the Euro.
• Oil supplies remain healthy. (see last month for details).
• There are concerns around output from the Dutch gas field Groningen, but the market has
generally been underwhelmed by recent government announcements (Output cuts due to
earth tremors causing property damage).
• Lancashire county council has rejected a planning application by shale gas explorer Cuadrilla,
in a major blow to what would have been the UK’s biggest round of fracking so far.
• We expect EURGBP to decline further below the 0.700 zone. Greece is taking over the news
at the moment, but a bigger issue is the medium / long term prospect of a British exit, which
would push Sterling down which would further depress prices.

4. Page 4
Irish Wholesale Electricity prices.
Irish prices are continuing to trade in a stable range, with no real change seen over the past months.
Euro / Sterling Trend.
The Market Operator publishes the wholesale electricity price in Euro and Sterling each day, and we
use this as the basis for our graphs, being a relevant marker with less market ‘noise’. However in the
past days we have seen prices dip below 0.7 and expect them to head below this level.

5. Page 5
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
mailto:<peter.brennan@SmartPower.ie>or direct dial at 01 482 4551 or my mobile 086 8402190.
Naturally, please feel free to forward on the newsletter (in full – without editing) to anybody who
has an interest. Sign-up is also free on our website (We only look for the email address where we
need to send the newsletter).
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