As negotiations continue between the government and its owners over a long-term funding agreement, Britain’s Rough Gas Storage site will make little contribution to energy security this winter.
Chancellor Kwasi Kwarteng began talks with Centrica, FTSE 100 company in the spring. Mr Kwarteng was then the business secretary and responsible for reopening the North Sea cavern. This was amid a rush to boost energy supplies during Russia’s war with Ukraine.
Chris O’Shea is the chief executive officer of Centrica. He stated earlier this year that the site could be restored in winter. However, it would still be at a low level of capacity. There are plans to increase its capacity significantly next winter as part of a phased approach.
The site is still being set up, and National Grid has not included it in its winter outlook for gas supplies. However, there are expectations that it will supply less than 1% of peak demand this winter.
Centrica received regulatory approvals to reopen at the end of summer and has begun to inject gas to test and cushion gas. It is expected that it can withdraw a maximum of one digit million cubic meters per day.
Rough, located 18 miles east of Yorkshire’s coast, had a full storage capacity. It could store enough gas for about ten days before it was closed in 2017. It was responsible for approximately 70% of the UK’s total storage capacity.
According to reports, Centrica is still in discussions with Ministers about a long-term form of taxpayer support for the site. With the growing demand for hydrogen due to carbon emission reductions, the company plans to eventually store it.
If prices for gas from the site were low, government support could be in the form of funding. However, it would not get the upside if they are high. This has been used to develop offshore wind.
Previous refusals by the Government to fund gas storage sites have been a sign that they are relying on market forces to provide what is required. Whitehall sources said that talks are ongoing and they are optimistic about a deal.
Ministers face calls to impose additional windfall taxes on oil-and-gas producers and electricity generators. These companies are making large profits in times of scarcity and should be taxed more than they subsidise. Centrica is a North Sea gas producer and holds a 20% stake in Britain’s nuclear fleet.
Although Rough may not be much help this winter industry executives have pointed out the serious threats to supplies next year when gas stocks will have to be refilled using even less Russian gas than this year.
An industry source said that the government may have underestimated this fact a little.
The UK has become more dependent on the global gas market as a result of the closure of gas storage facilities. This has been made worse by the Russian gas supply cuts to Europe, Moscow’s weaponization fuel, and has thrown the UK into chaos.
Britain, which has very little storage, has been exporting record amounts to Europe in the last few months as European countries try to stockpile gas for winter.
In the winter, however, the UK will often need to purchase gas from Europe. If supplies on the continent are short, there is no guarantee that it will be able to do so.
National Grid issued a winter outlook Thursday warning that any shortage of European gas supplies could “affect Britain’s ability to attract imported goods, should they be needed”.
The National Grid’s operator of the electricity system warned that rolling blackouts could occur this winter if Britain fails to secure enough gas for its gas-fired power stations or imports enough electricity. To prevent the system’s collapse, different areas could be shut off at different times using a rota.
Businesses and households are offered payment to reduce their demand, if necessary. This is done to balance the system.
Rolling blackouts would be the worst scenario. Yesterday, however, analysts challenged National Grid’s “base scenario” that Britain has enough electricity to last winter.
Kathryn Porter from consultancy Watt-Logic questioned assumptions about the availability of wind energy. She stated that they should look at the average generation available during cold spells and not just what generation is available during the year.
Director of gas systems operations Ian Radley stated in the outlook report that “GB benefits from having access to a variety of flexible and diverse sources of gas.”
