The government has been urged to speed up the publication of its gas security review amid concerns of gas shortages and price spikes.
The Gas Security Group (GSG) has written to Claire Perry in response to the minister of state for energy and climate change’s recent published correspondence with the Business, Energy and Industrial Strategy (BEIS) committee.
In her letter, reported by Utility Week, Perry revealed that the BEIS department is conducting an internal review of the UK’s gas security, the conclusions of which it will share in the autumn.
However, the group, which was set up by heavy gas users in the wake of Centrica’s decision to close its Rough storage facility two years ago, has called on Perry to wrap up the review and publish a “coherent set of conclusions and policy recommendations” by the end of the third quarter of this year.
And it expresses concerns about the assumptions and conclusions that the government appears to be making about the benefits of supporting additional UK gas storage and the role of gas storage in mitigating the impact of gas and related electricity price volatility.
While the letter says that UK consumers pay the lowest retail gas prices in Europe, according to Eurostat, the GSG says the same body shows that UK had the 12th highest out of 25 EU countries between 2015 and 2018.
The letter urges the government to recommend the possible measures to underpin existing and new investment in gas storage.
And it says a more effective demand side response (DSR) mechanism for gas users would be an “important extra marginal source of short- term supply flexibility”.
It says the inability of gas users to contract directly with National Grid means that the existing DSR mechanism, which allows industry to voluntary reduce demand after a gas deficit warning has been issued but before an actual emergency, is not working.
Clive Moffatt, chair of the GSG, said: “Our worry is that, judging from some of the comments and analysis in the minister’s letter, there are some supposed facts and assumptions about the operation of the gas market, which we would argue are not supported by current evidence and we would like to flag our concerns now so that we can discuss them further as the BEIS’s work progresses.
“We accept that seasonal price differentials in recent years have not been sufficient to incentivise investment in new gas storage. We also acknowledge that the consumer will have to bear some of the cost of any market intervention to support new investment.
“However, from the standpoint of consumers, the current seasonal price differentials do not reflect the welfare value – ie the insurance premium that consumers would be prepared to pay to have more gas storage – to help mitigate both the threat of supply emergencies and related short- term energy price volatility.”
Perry’s letter expressed the government’s confidence that the UK will “retain current high levels of security now and in the future”.