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No new subsidy needed for UK gas storage

Hydrocarbon Engineering,

UK Energy Minister Michael Fallon has confirmed that UK bill payers will not be asked to subsidise increased investment in new gas storage facilities. This decision will save bill payers £ 750 million over the next 10 years.

UK gas supply and storage

An independent analysis of UK gas supply and storage, funded by Government Ministers showed that the UK gas market is functioning well and is attracting gas from a range of sources that sufficiently meets current and predicted future demand. UK gas storage provides only a small portion of the total supply, 7% in 2012. The UK capacity in fact has enough facilities to provide double what is normally required during the winter months.

UK storage facilities cycle their capacity, injecting and withdrawing gas as required by the market. Therefore, unless restrictions on storage facilities are put in place, they cannot be relied upon to have gas when the market needs it most. Yet, storage facilities cannot be ignored as they are an important source of flexibility and help the gas market balance when demand is high.

The independent analysis, which was carried out by Redpoint, concluded that the costs of intervention in storage facilities would outweigh any benefit to the UK’s security of supply. Government and consumers would be subsidising investment that could largely be paid for by energy companies themselves.

Comments from UK Energy Minister

‘This decision will save bill payers around £ 750 billion over 10 years. Security of supply can be delivered more cheaply by the market and action is already being taken to ensure that it provides sufficient energy in the short and medium term. The government is committed to doing all it can to help consumers reduce energy bills, and there is no benefit in further expensive subsidies when the market is working. Gas supplies worldwide are increasing, and it is increasingly easy to import additional supplies to the UK if required.

‘It is up to industry to get on and invest in building gas storage, and they are doing so. Two gas storage facilities have recently been built and two more are under construction.’

New gas storage facilities

Two storage facilities have recently been opened, one in Aldbrough, Yorkshire, in November 2012 and another in Holford, Cheshire in February 2013. There are two more facilities currently under construction in Stublach and Hill Top Farm, Cheshire both set for completion in 2014.

Once the two additional storage sites are open, the UK gas storage capacity to meet peak demand will have doubled since 2000 figures.

Adapted from press release by Claira Lloyd

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