Because electricity is a commodity that cannot be stored efficiently, supply and demand must be matched at all times. Electricity generated from renewable sources such as wind and solar must be consumed immediately so it is fossil fuels such as coal, oil and gas which are brought online to balance demand. As wind and solar do not consume any materials in the production of energy, they are the first sources used to supply the grid. As demand increases, fossil fuels are added according to how expensive it is to obtain electricity from that source. This hierarchy, where the addition of progressively more expensive fossil fuel powered generators are added to supply the demand, is known as the merit order.

Wholesale electricity prices are calculated on a half hourly basis and are dependent on demand; this is referred to as the spot market price. The spot price is determined by the last source of electricity to enter the grid (or to ‘come online’) which is normally a fossil fuel such as oil or gas. Therefore, no matter how much renewable electricity is generated, the wholesale market price is determined by the price of the last generator to come online. The initial spike in gas prices in August 2022 resulted in significant price increases, which are beginning to recover. Energy company hedging strategies kept prices artificially inflated in Ireland for almost 14 months after the spike. Given current market prices for natural gas, currently €50/MWh (October 2023) renewable energy is one of the most expensive generation sources to supply electricity in Ireland.