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‘Relying on luck’: why does the UK have such limited gas storage?

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In the midst of a global energy crisis Europe is preparing to enter the winter with its lowest reserves of gas in at least 10 years. For the UK, which has some of the continent’s lowest gas storage capacity, the drawing in of colder months has left households even more vulnerable to the risk of shortages.

The UK’s stores hold enough gas to meet the demand of four to five winter days, or just 1% of Europe’s total available storage. The Netherlands has capacity more than nine times the UK’s, while Germany’s is 16 times the size.

Britain’s continental neighbours also have lower gas market prices. However, according to the business secretary, Kwasi Kwarteng, any connection drawn between soaring prices and meagre storage levels is a “red herring”.

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“There’s no way that any storage in the world will mitigate a quadrupling of the gas price in four months, as we’ve seen,” he told MPs this week. “The answer to this is getting more diverse sources of supply, more diverse sources of electricity, through non-carbon sources.”

Few would disagree that a lower reliance on gas would safeguard the UK against global market spikes. But many fear the UK’s low storage levels have left it exposed to higher prices and the risk of shortages this winter.

The Labour MP Stephanie Peacock accused the government of leaving the UK “vulnerable” to crisis and called on Kwarteng to admit that the closure of the country’s main gas storage site off the east coast four years ago was “a mistake”.

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The Rough storage facility, owned by Centrica, the parent company of British Gas, provided 70% of the UK gas storage capacity for more than 30 years before it shut in 2017 following a government decision not to subsidise the costly maintenance and upgrades needed to keep the site going.

For decades the UK had been able to avoid investment in costly storage in favour of tapping its domestic North Sea reserves for gas on demand. So why did the UK believe it could continue to do without even as those reserves declined?

In 2013, the then energy minister Michael Fallon said the decision to allow Rough to close would save the UK £750m over 10 years. Instead, a diverse range of energy sources would ensure the public received “reliable supplies of electricity and gas at minimum cost”.

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The global market for shipping ocean tankers filled with super-chilled liquid gas around the world was taking off. A UK shale industry appeared within reach. Cross-border trading with European neighbours had never been more liquid. In short: there were plenty of options.

But critics warned that the shutdown of the North Sea site would leave the UK exposed to the volatility of the global gas market, and forced to compete with other nations to attract imports with sky-high prices.

Charles Hendry, then a Tory MP, warned before the Rough shutdown that the UK should be paying to build more gas storage facilities after coming within hours of running out of gas, and said the country was relying “on luck” to avoid the gas grid running dry.

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It was a matter of months after the closure of the Rough site that the UK’s energy operator, National Grid, issued a formal warning that the country did not have enough gas to meet demand during the freezing “beast from the east” storm which battered the UK in March 2018.

The gas market surged by almost 75% within the day. The country did not run out of supplies but analysts estimated that the cost of gas overall on the day of National Grid’s warning had climbed eightfold from usual levels.

John Underhill, a professor at Herriott-Watt University in Edinburgh, warned this week that the UK’s gas market woes would only deepen through winter as cold, dark days drive demand for gas higher.

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“The real challenge will lie on cold, dark, windless days of winter when demand for heat, light and energy are at their highest,” Underhill said. “Without addressing the need to replenish sources, have secure and reliable supplies and storage issues, the current crisis is simply a warning of what is to come over the winter and beyond.”

The UK hopes to replace much of its reliance on fossil gas with cleaner alternatives in line with its goal to cut emissions to net zero by 2050. But before the government achieves an overhaul of the electricity systeM the UK will continue to rely on gas power plants, which produce around 50% of the UK’s electricity.”

Underhill added: “Short of the lights going out, cookers failing to light and radiators going cold, this may be as close as we get to the ‘black swan’ moment where people realise where our energy comes from and our need to ensure there is sufficient homegrown supply, reliable import sources and back-up to avoid shutdowns and other unintended consequences for food supply chains and the like.”