UK 'Must Review Gas Storage Shortage': Industry

The UK must urgently review the case for more gas storage in order to minimise the risk to supply and maintain flexibility, the Energy & Utilities Alliance (EUA) told parliament October 31. A parliamentary committee is investigating the adequacy of the UK storage portfolio, given the closure of the giant Rough asset, once one of the largest in Europe and previously used for balancing demand in winter.

With Rough gone, the UK can meet only a few percent of its annual demand from its storage facilities which are all now quick-response salt caverns, unlike Rough, which was a depleted gas field that depended on seasonal price differences. Those winter-summer price differences are too small to justify the major refitting that the offshore platform would need to be serviceable. Members of parliament are asking the Department for Business, Energy and Industrial Innovation what, if anything, needs to be done to replace it.

One question that the committee will consider is whether the government should intervene if the market will not; or whether the array of under-used LNG import terminals and interconnector pipelines are, by themselves, a sufficient resource.

Roddy Monroe, the former head of the operator of Rough, Centrica Storage, told the committee that there may be serious implications for UK energy security if policy makers rely solely on the market to deliver the right level of investment to meet broader government objectives, which include making the transition to a low carbon economy and providing access to affordable energy. 

Monroe said that energy security is underpinned by long life, capital intensive investments which require long-term financial certainty and the government has felt it necessary to intervene in the electricity market to help deliver positive changes. He said that such intervention may now be necessary for the gas market in order to provide the right level of gas security.

He said: "We urge government to look, in detail, at the issue of gas storage, such as they did in 2013. Since then we have seen a number of material changes to the energy market which have the potential to worsen energy security and, in particular, significantly increase the exposure to extreme price volatility."

These include the winding down of Groningen, the major swing field in the Netherlands, which creates a gap in a number of northwest countries' supply portfolio thereby pushing up demand for other gas during winter. 

The Gas Security Group (GSG), which has been pushing for a public inquiry since March, has found that most industrial users believe that “gas supply disruptions and greater gas and electricity price volatility will have a critical negative impact on their business in the next 10 years”.

There are other forms of peak supply, including interconnectors and LNG terminals, but the GSG points out that although the country has the capacity to buy in LNG and pipeline supplies this does not mean that the gas will be available at an affordable price; "in fact during the last extended cold spell in March 2013, virtually no LNG arrived in this country," it said. 

The International Energy Agency defines energy security as “the uninterrupted availability of energy resources at an affordable price." The GSG believes that the UK should adopt a similar definition.