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The owner of British Gas has stopped filling a crucial fuel storage facility in the North Sea, raising the risk of winter shortages and potentially higher energy prices.
Centrica (CNA.L) has stopped injecting natural gas into the Rough storage site off the Yorkshire coast amid concerns about the site’s financial viability. Executives are understood to be pressing ministers for price guarantees to ensure profits from the facility.
Rough comprises about half of the UK’s energy storage capacity and is a vital buffer against spells of cold windless weather when demand for gas surges – both to heat homes and for generating electricity.
Centrica reopened the facility at the Government’s behest in 2022 during the energy crisis, when ministers belatedly realised the UK was vulnerable to gas shortages. However, last December the company warned it was making losses of between £50m and £100m at its Centrica Energy Storage+ business division.
It said Rough was not financially viable in the current market, given gas prices have fallen and are relatively stable.
The company has now halted filling because forecasts suggest the difference between prices today and in winter mean it would not make financial sense to pay for the storage.
Centrica has opened talks with the Government over new financing arrangements. The company met with Ed Miliband, the Energy Secretary, in March to discuss options for keeping the plant open, according to reports in Energy Voice, a trade journal.
A spokesperson for the Department of Energy Security and Net Zero (DESNZ) said it was a commercial matter but the Government was “open to discussing proposals on gas storage sites, as long as it provides value for money for taxpayers”.
Gas is envisaged to comprise up to 5pc of the UK’s energy demand by 2030. It is a vital fuel for power stations that can be turned on at short-notice, helping to meet peaks in electricity demand or cover gaps in supply when poor weather means renewable generation falls short.
At the time of reopening Rough for gas storage in October 2022, the facility was able to store approximately 30bn cubic feet (bcf) of gas, but further investment means the facility is now able to store up to 54 bcf of gas. Following the extension of capacity, it can hold enough gas to cover the UK’s energy needs for up to six days.
The UK’s ability to store gas reserves is significantly less than other countries and mainland Europe, with just 12 days of total capacity compared to 89 days in Germany and 103 in France.
This coming winter, the UK’s reserve gas capacity is expected to be materially lower than for the last two winters – potentially leaving the country vulnerable if it is a particularly cold period and if renewable generation falters.