Halite Energy confident Preesall will get financed

Gas developer Halite Energy has expressed confidence that the Preesall gas storage project will receive financial backing, because its fast-cycle capabilities make it economically robust in the UK market.

Speaking to Utility Week, chief executive Keith Budinger said that, since the project had received consent from energy minister Lord Bourne in July, it has “had a lot of interest from domestic and overseas parties”.

“There’s been a significant increase [in interest] in the project, and we’re currently in discussions with a number of industry and financial investors,” he said.

This confidence comes despite warnings from the industry that new gas storage projects will remain “dead in the water” unless developers can convince the government to subsidise them. Managing director of trade group Gas Forum, David Cox, told Utility Week last month that the government has “got to believe that more storage is needed in the market” so that it changes its strategy of not subsidising strategic storage.

Budinger insisted that the government should “provide more certainty” in policy and decision making in the development of its energy strategy. “I think certainty is the issue for investment and I think if that comes then the rest will follow,” he said. “If the government really wants the market to decide, then the market will decide.”

However, he added, Preesall has attributes which make it an attractive investment case, including its fast-cycle capabilities, the depth of the salt, its proximity to the national transmission system, the speed of injection and withdrawal, and the water source and brine disposal route.

“All of those areas… contribute towards the project being pretty robust from an economic perspective.”

The 900 million cubic metre gas storage facility is proposed to be constructed on the east side of the Wyre Estuary at Preesall in Lancashire, and will be used to store and extract gas from local underground salt caverns.

Halite is now focused on securing the investment for construction of Preesall, and hopes investment discussions will be finalised by the first quarter of 2016, enabling it to “break new ground” on the project by Q4 2016.

“If we’re able to achieve that, the project will come fully online in 2022/23, which is when the UK will need it because of intermittency and import dependency,” said Budinger.

The government recently made the case for a continued role for gas in the UK future energy market. In a blog, energy minister Andrea Leadsom wrote that, even as our reliance on fossil fuels for generating electricity reduces, “we will still need to use gas for heating and cooking” as well as for producing products.

However, speaking at a climate change event in London yesterday, New Climate Economy senior adviser Michael Jacobs warned that it must only be used as a “very short-term bridge” and needs “very strong guard-rails” as it still produces greenhouse gas emissions and will have to decarbonise. This will require research in carbon capture and storage, which energy companies “do not put their money into”, he said.