Gas storage is ‘dead in the water’ without subsidy, says gas expert

New gas storage projects will remain “dead in the water” unless developers can convince the government to subsidise them, the Gas Forum has warned.

Speaking to Utility Week, David Cox, managing director of trade group the Gas Forum, said that if project developers could convince the government to sponsor strategic storage, which would be kept for emergencies and to deal with major problems of supply, they would “effectively get a government subsidy”.

“The government has got to believe that more storage is needed in the market. Then it would change its strategy of not subsidising new, strategic storage. If it were to do that, and start putting money into new storage projects, that would obviously change the dynamic,” he said.

Last month, Halite Energy’s Preesall gas storage site was granted planning consent by energy minister Lord Bourne. If built, it will act as a demand response facility, with gas entering the national system in response to market conditions. However, with seasonal price spreads having been depressed for some time, experts have warned it is unlikely to get financed.

Cox argued that, other than the capacity problems Centrica Storage is having with Rough there is “no really good news” in the pipeline for new storage projects such as Preesall.

“They are all on hold. They were all dead in the water two years ago and nothing much has changed since. At least not in the way that helps them,” he said.

Regulated models for storage would make investing in storage closer to investing in networks, with revenue streams being underwritten by customers. The government considered this in 2013 and decided that there was no economic case for a significant intervention in relation to gas storage. However, Cox pointed out, it could change its mind.