There is No UK Energy Gap – The Problem is Prices

Whilst there is an obvious incentive for the UK’s utilities to talk up the possibility of an energy gap and the “lights going out”, there is little incentive for them to invest in securing the UK’s gas supplies and develop new gas storage. Whilst  George Osborne has been seduced by the promise of shale gas – a promise that may or may not be fulfilled – no UK government has properly looked at the considerably less sexy issue of gas storage.

Gas storage allows for gas to be stored in summer, when demand is low, and then used in winter when demand is higher. Crucially it helps flatten gas prices out across the year, and the UK’s domestic gas prices are too dependent on the forward gas price for the following winter. Investment in gas storage would help bring bills down much sooner than any shale gas development can.

Jonathan Lane, GlobalData’s Head of Consulting for Power and Utilities, discusses why it is ignored. “Firstly we do not have a history of gas storage in the UK. As a former major gas producer, seasonal gas demand could be managed through swing production from North Sea gas. Secondly, getting available sites through the planning process has deterred investors, and thirdly, there is no incentive on the part of the major UK energy suppliers to invest in gas storage, as they can easily pass through higher gas prices to consumers.”

He continues: “Germany, Italy and France have always been natural gas importers and have invested heavily in storage to protect their customers. The Netherlands is a gas producer and still has swing capability from its Groningenfield, which leaves the UK in an uncomfortable position.”

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