Centrica may close UK’s largest gas storage site. Is the energy system really ready? | Nils Pratley
Monday was another of those dunkelflaute days when the wind barely blows, the sun doesn’t shine and it’s cold.At times, gas-fired power stations were generating 70% of the UK’s electricity while windfarms and solar facilities were contributing as little as 7% combined.It was a reminder of why, even under the government’s rapid programme to decarbonise the electricity grid by 2030 by expanding renewables, the current gas-fired capacity of 35GW will be retained as backup.The fossil-fuelled plants may stand idle most of the time – they are scheduled to account for only “up to 5%” of generation over a full year in 2030, versus 34.7% in 2023 – but, when they’re needed, they will sometimes still be operating at full pelt.
So here’s a question: what is the right level of gas storage for an energy set-up that will have to be more flexible in future?It is also a pressing question because Centrica, having partly reopened the large Rough storage facility off the Yorkshire coast as recently as 2022, is already suggesting it may close it again,The chief executive, Chris O’Shea, revealed at a City presentation last month that Rough would make an operating loss of between £50m and £100m in 2025,“Making material losses is not something that is either sustainable or will be sustained by us,” he said,The economics of gas storage, the company says, only work when the difference, or spread, between summer and winter prices is wide,That was the case in the two years after Russia’s invasion of Ukraine, but not now.
Centrica has not ruled out closure of Rough, which currently represents half the UK’s gas storage capacity, before next winter,One reaction to such warnings-cum-threats is to say Centrica is engaged in self-interested lobbying in search of its long-desired long-term deal with the government that would also cover eventual conversion of Rough to store hydrogen, the coming energy source (possibly) for the UK’s industrial plants in the 2030s,Thus its comments a couple of weeks ago, during another dunkelflaute event, that gas storage levels in the UK were “concerningly low”, met with a chorus of scepticism,They sounded to some as too self-interested,The Department for Energy Security and Net Zero said it had “no concerns” about supplies this winter.
Yet it is also true that outright closure of Rough would – possibly – change the calculations in future.Talk to energy system experts and they make two detailed points.First, the one that doesn’t suit Centrica’s case: the importance of Rough is overstated because it can’t pump huge volumes when they are most needed (the site was only partly reopened in 2022, so its pressures are low); the facility is really more of a balancing mechanism, alongside other sources such as liquefied natural gas shipments and interconnectors from Norway; the UK coped during the “beast from the east” in 2018 when Rough was shut.But then there’s the second point: the real issue, they say, is whether the UK needs an expanded Rough as a strategic gas reserve, or a form of insurance against future geopolitical and supply shocks.On that score, even many advocates of maximum wind and solar, as soon as possible, would agree that the case for storing more gas is strong because the backup system has to be secure.
While most gas in the UK is used for heating, a renewables-heavy system makes demand for gas for generation more volatile and unpredictable.To protect consumers from price spikes, runs the argument, a strategic reserve becomes more important than in the past – to avoid, for example, paying the nose-bleed rate of £5,000 a megawatt hour (MWh) to a couple of gas power station owners, as happened this month.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionThere are pros and cons, in other words.But you will search in vain for a clear assessment in the major strategic documents produced at the end of last year – the Clean Power 2030 advisory report by Neso, the national energy system operator, and the government’s own 2030 Action Plan.Gas storage barely got a mention.
Meanwhile, the immediate future of Rough is regarded as only a commercial matter for Centrica,That feels like an oversight,The UK already has some of the lowest levels of gas storage in Europe,If capacity could soon halve, shouldn’t somebody be modelling the risks? Renewables are the exciting stuff, but the gas side will still matter for a while yet,
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