Strategic reserve ‘not ruled out’, says minister

A strategic power reserve has not been ruled out even though the government decided not to proceed with the idea in the latest REMA (review of electricity arrangements) consultation, the energy minister has said.

Justin Tomlinson, who took over the energy brief three weeks ago, made the comments while being grilled by the House of Lords science and technology committee over its concerns that the government has decided not to proceed with a strategic reserve in REMA.

The committee recommended in its report on long duration energy storage, published in March, that a strategic reserve should be set up to safeguard security of supply in the event of a future energy shock, like that triggered by Russia’s invasion of Ukraine in 2022.

Baroness Neville-Jones, a member of the committee and a former security minister, criticised the government’s “reluctance” to establish a strategic reserve.

Noting defence secretary Grant Shapps’ recent statement that the UK is in a “pre-war world”, the ex-chairman of the government’s Joint Intelligence Committee said the country has benefited from the US strategic reserve.

She was backed up by former science minister Lord Drayson, who described the government’s stance on having a strategic reserve as incoherent and over reliant on market solutions.

It also doesn’t factor in a potential repeat of the huge bill subsidies that the government paid during the 2022-23 energy crisis, he said: “In certain circumstances, the market will not make the investment because the costs of failure to have an energy reserve don’t come back on the market but on the country as a whole.”

Responding to the peers’ criticism of the government’s approach, Tomlinson said “nothing is ever ruled out”.

“Everything is under constant review and you are making a very powerful argument,” he said, while adding that ministers are sensitive about the importance of ensuring of value for money when taking decisions like establishing a strategic reserve.

Dan Osgood, director of energy markets & analysis at the Department for Energy Security and Net Zero, told the committee the government’s current thinking is that the capacity market is a better mechanism for ensuring security of supply.

He said that keeping capacity out of the market for the vast majority of the time in a strategic reserve, which may never have to be used, could drive up the price of other sources of power that are more on tap.