EUA calls for government rethink on gas storage

The government must review its decision to let the market determine the availability of gas storage, according to the Energy and Utilities Alliance (EUA).

Speaking to Utility Week, EUA chief executive Mike Foster warned that “noticeable differences” between winter and summer prices of gas, needed by the market to deliver gas storage, have “not been seen for a number of years”.

“The problem has been that Government – both the previous one and the one up to 2015 – has said the market should determine the availability of gas storage,” he said. “The market will only deliver gas storage if there are noticeable differences between winter and summer prices of gas, the price spread.”

“This is one of the reasons people have not come forward and delivered gas storage even though they might have permission,” he added.

Many gas storage schemes in the UK have been consented but are yet to be financed and built. The Gateway Gas Storage scheme gained consent from then Energy Secretary Ed Miliband in 2008, but is still unable to get financial backing.

Foster continued, insisting there is a “requirement for additional gas storage” in the UK.

“Compared with UK total demand for gas, our storage capacity is about 6 per cent,” he said. “That compares with 28 per cent in France, 27 per cent in Germany and 35 per cent in Holland. We are considerably lower than our European counterparts.”

He pointed out that some of the UK’s existing gas storage, such as Centrica’s Rough facility, is getting old and there are going to be “costs associated with its upkeep”.

“To lose what would be in the region of 70 per cent of our gas storage if Rough was not available, given that we don’t have a lot anyway, would really bring into question the government’s priorities around energy security.”

Rough is the largest gas storage facility in the UK and stores natural gas for European energy producers, traders and suppliers.

The facility has a storage capacity of more than 3 billion cubic metres which is approximately 70 per cent of the UK’s gas storage capacity, and can supply 10 per cent of the UK’s peak gas demand.

“If, in tackling the trilemma, the government believes that there is a strategic imperative to maintain security of supply – both price security and physical security – they need to review the whole basis upon which gas storage is delivered.

“And to certainly review the decision they made a couple of years ago about the principle of leaving it to the markets, because clearly it isn’t working.”

Earlier this month, it was announced that the decision on whether to move ahead with the controversial Preesall gas storage project in Lancashire will fall to Lord Bourne.

British Ceramic Confederation chief executive Laura Cohen told Utility Week it is “really important” for the government to “continually keep the need for more gas storage under review” and, if necessary, “intervene to ensure that the market on gas storage delivers”.