Government ‘must act now’ to unlock gas storage investment

The government must use its annual energy statement this month to review the need to unlock new investment in gas storage, an analyst has warned.

Energy market analyst Clive Moffatt insisted the government must take action “now” to manage the risks associated with increases in both the level of import dependency and the volume of intermittent renewable energy generation.

To unlock new investment, the government should impose an obligation on suppliers and shippers to hold a certain proportion of their gas in store ahead of every winter, he insisted. This would be the “simplest and most cost-effective solution because it is market-based”.

Gas will become the predominant source of both heat and power by 2030, Moffatt said, and although the UK has “ample import capacity”, its vulnerability is in the shorter term.

With 75 per cent of the country’s gas storage capacity contained in Centrica’s Rough facility which is nearing the end of its design life, it is becoming increasingly vulnerable to short-term variations in demand and supply.

“Successive governments have created such an interventionist environment that has eroded market confidence in energy infrastructure investment that it is very difficult for new power generation or gas storage to move forward until clear regulatory principles are established,” he added.

“New gas storage assets take almost ten years to develop and construct meaning that action is required now to address market requirements around 2025.”

Last month, Gas Forum managing director David Cox warned that new gas storage projects will remain “dead in the water” unless developers can convince the government to subsidise them.