Broken gas storage talks leave UK facing price hikes, experts say

Energy experts and MPs have warned that Britain will be vulnerable to gas shortages and high energy prices next winter as the government and Centrica fail to reach an agreement on expanding gas storage. UK’s largest.

Centrica, which owns British Gas, partially reopened its crude gas storage site off the Yorkshire coast, at the request of the government last October — five years after it was closed to the new pump. But the site is running at only 1/5 of its previous capacity.

The company has been lobbying the government to secure the minimum consumer-funded revenue it says it needs if it is to invest the £150 million needed to double Rough’s capacity to 60 billion cubic feet in next winter.

Negotiations between the government and Centrica over a new funding mechanism have failed in recent weeks and Centrica has warned that it will not be able to expand its capacity. in time for next winter.

Dieter Helm, a professor of economics at Oxford University and a former government energy adviser, said the UK had failed to develop its gas storage with “the urgency needed today”. .

“Storage is part of the security of supply and is a public good, but the market will not supply itself. Reliance on LNG carriers at sea comes at a cost, which explains why the UK has been hit hard by soaring gas prices, despite importing very little from Russia.”

A source close to the government said that “Centrica is too greedy”, adding that discussions have become increasingly heated and acrimonious.

“They were unable to get additional facilities up and running in time for next winter and supply constraints have eased; the government just walked away,” the source added.

A lack of gas storage can contribute to increased energy bills by leaving UK depends on LNG imports during the winter when costs are higher, a problem that has become especially acute since Russia invaded Ukraine.

Michael Bradshaw, professor of global energy at Warwick Business School, said “a lack of storage capacity in the UK puts customers at risk of a secure supply next winter”.

“This leaves the UK dependent on attracting LNG cargo during the winter months when prices tend to be high and competition is greater; The situation is exacerbated by the lack of solid long-term contracts that guarantee deliveries to UK ports.”

center said in October that the UK’s nine-day gasoline storage time is far behind Germany’s 89 days, France’s 103 days and the Netherlands’ 123 days.

A Centrica spokesman said “negotiations have not progressed but the door is always open”.

“We did the best we could, but this is a long-term strategic decision and to do more we need a model tuned so that it supports investment for years to come,” he said. .

The Department for Business, Energy and Industrial Strategy said it was “a Centrica problem”.

Darren Jones, chair of the business selection committee, said: “We have very little precious time to prepare for next winter. This winter has shown how costly not having enough gas can be.”

In the longer term, Centrica is lobbying for government support for a £2 billion plan to turn the site into a hydrogen storage facility in line with the UK’s green ambitions.

Gary Smith, general secretary of the GMB union, said: “This looks like another energy failure from the government. Our country needs all the gas storage we can get our hands on. So what are we waiting for? For years, the UK has endured the disastrous decision to shut down Rough. Rishi Sunak needs to do this right and fast.”

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