Britain will face high gas prices and gas shortages next winter due to the failure of Centrica and the government to agree on the expansion of Britain’s largest gas storage facility, energy experts and MPs warned.
British Gas’s owner Centrica partially reopened the Rough Gas Storage Site off the Yorkshire Coast at the request of the government last October, five years after it had been closed for new injections. The site now operates at a fifth its former capacity.
The company was lobbying the government to obtain consumer-funded minimum revenue guarantees. This is necessary if the company wants to invest the PS150mn needed to double Rough’s production to 60bn cubic yards by next winter.
Recent talks between Centrica and the government over the new funding mechanism fell apart. Centrica also warned that it won’t be able expand the capacity by next winter .
Professor of Economics at Oxford University and former energy advisor to the government, Dieter Helm said that the UK was not developing its gas storage in the “urgency needed”.
Storage is essential for security of supply, and it’s a public benefit. But the market will not deliver. The cost of relying on LNG tankers to transport LNG on the high seas is a reason why the UK was so severely affected by rising gas prices, even though it imports very little from Russia.
A source close to government stated that Centrica was “too greedy”, and that discussions had become more heated and acrimonious.
The source said that they couldn’t get the additional facilities up and running in the timeframe for next winter, and that supply constraints had eased. “The government just walked,” he added.
A shortage in gas storage can lead to rising energy costs. The UK is reliant upon LNG imports during winter when the cost of LNG is higher. This issue has been especially critical since Russia invaded Ukraine.
Michael Bradshaw, global energy professor from Warwick Business School, stated that customers are exposed to supply risk next winter due to the UK’s lack of storage capacity.
The UK is now dependent on LNG cargoes being attracted during winter months, when prices tends to be high and competition can be fierce. This situation is exacerbated by the absence of long-term contracts that would ensure deliveries to UK terminals.
Centrica stated in October that the UK’s nine days gas storage was well behind France’s 89 days, France’s 103 days and the Netherlands’ 123 days.
Centrica spokesperson said that “talks have not progressed, but the door remains open.”
He said, “We have done everything we can but this is long-term strategic decisions and we need a regulated system so it supports the investment for many years to come.”
It was a matter for Centrica, according to the Department for Business, Energy and Industrial Strategy.
Darren Jones, chairperson of the business select panel, stated that there is very little time left to prepare for next season. It has been a costly winter to not have enough gas storage.
Centrica is lobbying the government to support its PS2bn plan, which will transform the site into a hydrogen storage center in accordance with the UK’s green goals.
Gary Smith, the general secretary of GMB union said that this looked like another energy failure by the government. We need all the gas storage that we can get for our country. What are you waiting for? The UK has been suffering for years from Rough’s disastrous closure. Rishi Sunak must make this right quickly.