Rough gas storage site may be reopened to beat energy crisis

Britain’s biggest energy supplier is in talks with the Government about reopening a mothballed gas storage facility in a bid to protect the industry from surging power costs.

Centrica, the owner of British Gas, is seeking to restore the defunct Rough site off the Yorkshire Coast to boost the country’s energy reserves.

It comes after gas prices spiked to as much as 11 times normal levels in the wake of surging demand.

The crisis has triggered 12 bankruptcies among UK energy companies – a wave of failures which will add £100 a year to household bills, according to Chris O’Shea, the chief executive of Centrica.

Rough previously housed 70pc of the UK’s natural gas stores but was shut in 2017 when the company deemed it too expensive to maintain.

Speaking to a House of Lords committee, Mr O’Shea said: “We have an asset that we have been talking to the Government about converting back into a storage asset, the Rough field in the North Sea. “I would argue for resilience.”

Mr O’Shea is lobbying for the site to get a new lease of life under the UK’s plan to achieve “net zero” emissions by 2050.

The Rough gas storage facility off the Yorkshire coast - Centrica© Provided by The Telegraph The Rough gas storage facility off the Yorkshire coast – Centrica

Rough would eventually be used to store hydrogen, which is set to replace fossil fuels in the 2030s, but Centrica is also keen to use it for natural gas before then.

Mr O’Shea said: “In 2015-17 we realised there would be substantial investment required into the asset to maintain it as a storage asset. 

“The returns that we could see didn’t justify that investment. What we have been talking to the Government about now is how we make sure, as we move towards a hydrogen economy, that we have the right supply chain.”

Hydrogen© Provided by The Telegraph Hydrogen

He claimed the company wanted “no subsidies whatsoever” for the scheme and that it could be paid for by charging consumers through their bills.

Ministers have been accused of leaving the UK “dependent on luck” following a reduction in gas storage capacity over the past decade which means the country cannot turn to reserves when prices rise.

Britain now has space to store just one week’s-worth of gas, compared to an estimated 90 days in France and Germany.

The jump in wholesale prices has proved disastrous for energy providers because the amount they are able to charge households is capped, meaning they are unable to immediately pass costs on.

A total of 12 companies have gone bust since the crisis began, affecting hundreds of thousands of customers who will be transferred to a new supplier. The costs involved will ultimately be added to household bills, which already stand at about £1,000 a year.

Mr O’Shea said: “The current retail market failures will put £100 on the bills of every single home in the UK.

“Whether that is a house in Belgravia or a studio flat in a deprived area of Glasgow, it will be the same amount – and that is the same with the policy costs at the moment.

“If we put these costs on bills at a flat rate then that will not achieve a just transition. 

“That is not to say it is easy to simply decide to fund these things from general taxation.

“The Treasury has to balance the books. But we have to have that difficult conversation.”

A Government source confirmed Centrica had come forward with proposals for storing hydrogen at Rough, but downplayed the idea the site could be used again for natural gas.

Kwasi Kwarteng, the Business Secretary, has previously dismissed concerns about gas reserves as a “red herring”. He said no amount of storage could have mitigated wholesale price rises on the scale reached in the past few months.

The scheme put forward by Centrica would revamp the Rough facility at a reported cost of £1.6bn.

A Government spokesman said that no final decisions have been taken about Rough or other potential hydrogen storage facilities.

He added: “We are continuing to explore the future of the clean energy storage landscape.

“The UK Hydrogen Strategy considers the role of hydrogen storage in greater detail and whether further regulation or support mechanisms are needed to maximise its potential.”


About the author

Related Post

Leave a comment

Your email address will not be published. Required fields are marked *