By Nicholas Earl
The UK’s largest gas storage facility is unlikely to play a huge role in the UK’s scramble for supply security this winter, with the Government and British Gas owner Centrica still unable to confirm a funding deal for its reopening.
The energy firm is seeking taxpayer support to fund its revival, and hopes it can shift the site’s purpose from gas to hydrogen over time – as the UK scrambles to cut carbon emissions and meet 2050 net zero goals.
Government support mean funding for Centrica if prices for gas from the site are low, but it would not get to keep the upside if prices are high, according to The Telegraph.
This approach has been used to help develop offshore wind through the contracts-for-difference scheme and has seen the costs of generation drop to record low.
Centrica first closed the Rough storage site five years ago after the Government refused to subsidise repairs to the North Sea facility.
Chancellor Kwasi Kwarteng then opened talks with the FTSE 100 company earlier this year – when he was Business Secretary – with the UK pushing to boost its supply security following Russia’s war on Ukraine.
BEIS has since worked with the National Grid to maintain five coal power units this winter, and has revived fracking after a three year moratorium to boost domestic energy generation.
Gas storage site still not up and running
Centrica applied to re-open the site and received regulatory approvals from the North Sea Transition Authority this summer.
Over the past few months, it has started testing the facilities with cushion gas but Rough is yet to back online.
It has also not been included in the National Grid’s winter outlook for gas and electricity – which was published earlier this week.
At full capacity, Rough – which is 18 miles east off the coast of Yorkshire – could store enough gas to meet winter demand for approximately ten days.
This accounted for about 70 per cent of the UK’s storage capacity.
However, it expects to only be able to supply less than one per cent of peak demand this winter, as first reported in The Telegraph.
Over the coming months, Centrica expects it will only be able to withdraw relatively small stores of gas, in the single digit million cubic metres range.
Centrica would significantly increase its capacity next winter as part of a phased approach.
Shortage fears stoke concerns of blackouts
The closure of gas storage facilities has left the UK increasingly dependent reliant on the global gas market, which has driven wholesale costs to all-time highs this year following a Russian squeeze on European supplies.
While the UK only depends on Russia for around four per cent of its gas needs, it has minimal storage without Rough, and has been exporting record amounts of gas to Europe to help countries top up their tanks ahead of winter.
Currently, European Union (EU) supplies are topped up to 90 per cent of capacity heading into winter.
With little storage of its own, the UK has been exporting record amounts of gas to Europe over the past few months as countries on the continent try to fill up their storage tanks ahead of winter.
This in the country’s interest as it later buys gas back from Europe in the colder months.
However, there is no guarantee of return purchases if EU supplies run short.
In its winter outlook on, the National Grid revealed that UK should be able to meet its supply needs over the coming months and stave off blackouts.
Nevertheless, it warned that any shortfall of gas supplies in Europe could “affect Britain’s ability to attract imports, should they be required”.
Its electricity system operator operator warned of a “worst-case scenario” of three-hour blackouts as soon as next January if the country fails to secure enough gas to run gas-fired power stations, and enough electricity imports.
Areas could be cut off at different times on a rota system, to prevent the grid from collapsing.
Meanwhile, households and businesses are being offered payments to cut their demand if needed at short notice to help balance the system.
This includes running washing machines at night or shifting production hours.
The post That’s Rough: Gas storage site still not open as winter crisis looms appeared first on CityAM.
