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Outside Easington, a small coastal village in East Yorkshire in the north of England, a loud, prolonged storm this week marked a pivotal moment in the UK’s push to strengthen its energy security.
At the Easington gas terminal, the sound of compressors starting up signaled that gas would soon be transported ashore by pipeline from Rough, Britain’s largest storage facility, 18 miles out in the North Sea.
Injections of gas from Ruff – which has a surface area equal to that of London and the City of Westminster – into the national network via Easington for the first time in five years, helped meet increased demand for heat and power generation on a cold, flat Tuesday.
It also comes amid calls for the government to examine the UK’s long-term approach to energy storage as households face higher gas and electricity bills due to extreme volatility in global markets following the Ukraine war.
Energy group Centrica closed the terminal in 2017 saying it was no longer viable without state subsidies. But last month it reopened the 37-year-old facility as storage at the government’s request.
However, it will operate at only a fifth of its previous capacity of 150bn cubic feet of gas for the next two winters, given the work required to ensure investment and operations remain safe.
Centrica’s rough gas storage facility © Simon Price/Centrica
“We need more battery storage and we need more gas storage,” Centrica chief executive Chris O’Shea said in a visit to Easington this week.
Although the company had been mulling options for rough for some time, its reopening was one of several steps that ministers rushed to take after Russia retaliated against sanctions on Ukraine by supplying weapons-grade gas. This led to a global race for alternative energy sources and a spike in wholesale energy costs.
Rough’s 30bn cubic feet of capacity is equivalent to about nine tankers of liquefied natural gas and enough to meet three days of peak domestic demand. The lower pressures since its reopening also limit how quickly the gas can be withdrawn.
Currently, withdrawal rates are limited to 4.5 million cubic meters per day, which would meet just 1 percent of demand on a cold winter day, according to National Grid forecasts.
According to energy consultancy Rystad, only five days’ worth of gas demand can be met by storage in the UK before crude is brought back on stream. In contrast, France, Germany and Italy had reserves of 112, 111 and 97 days respectively. More gas storage buffers against higher prices, as well as provides a buffer in the rare event of shortages.
The profitability of storage depends on the large difference between gas prices in the summer – when higher temperatures have historically reduced demand and therefore costs – and in the winter. But that seasonal variation over the past decade has no longer proved to be enough of a draw for investors to plug into new facilities.
Long before Rough’s closure, storage developers urged the government to implement a financing mechanism known as a “cap and floor,” which guarantees a minimum return.
The tool has been used to promote the construction of other energy infrastructure, including subsea power cables. But in 2013, David Cameron’s coalition government decided that there should be no subsidies for gas storage, saying that “it is increasingly easy to import additional supplies into the UK if necessary”.
Yet after nearly 18 months of skyrocketing prices and worries about a potential gas crisis, storage operators hope the government will now reconsider.
“The events of the last 12 months have taught us that we cannot take energy security for granted,” said Mike Foster, head of trade body the Energy and Utilities Alliance. “A responsible government will look at all options,” he said, adding that it was “up to ministers” to evaluate models such as a cap and floor for gas.
Centrica made an undisclosed investment from its own balance sheet to prepare rough for this winter, and benefited from lower gas prices when filling facilities in October and November due to unseasonably warm weather.
The company has said it can fully restore the rough to its former capacity through renovation or reconstruction, enabling it to store methane in the short term and hydrogen in the future. But a financing mechanism will be needed to encourage the group to commit the estimated £2bn needed.
Being hydrogen-ready, Rough could also meet the UK’s 2050 net zero emissions target, the company has argued.
The government considers low-carbon hydrogen – produced so that no harmful gases are released into the atmosphere – to be critical to removing emissions from some of the most polluting sectors, such as steel and chemicals.
Centrica has said that, under some forecasts, the equivalent of two new crudes would be needed to meet future demand for low-carbon hydrogen, although academics and experts disagree on the extent to which the gas will be used.
If the right incentives are forthcoming, O’Shea said, the company could potentially start investing as early as next year, although the full £2bn project will take five to seven years to complete.
“The real prize for the country is to have crude at full capacity . . . 150bn cubic feet in the long term, designed for hydrogen and able to store methane in the interim, that’s the real prize and I’m very reluctant to have any conversation with the government about that.” Ready,” he said. “[Rough] It is truly a world-class asset.”
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