Fallon: no new subsidy needed for gas storage – decision saves bill payers up to £750 million
Bill payers will not be asked to subsidise increased investment in new gas storage facilities, Energy Minister, Michael Fallon confirmed today, saving bill payers subsidy costs which over 10 years could have amounted to £750 million.
Independent analysis, commissioned by Ministers, shows the UK gas market continuing to function well in attracting gas from a range of sources to meet current and future demand, with gas storage providing only a small proportion of UK total supply (7% in 2012).
The UK has capacity to deliver twice the amount of gas required in a normal winter, and has coped well with extreme winter conditions, such as the extended cold snap this March, and the coldest December since records began in 2010.
Gas storage, while important, only provides a small proportion of UK total supply, and does so in combination with our diverse range of alternative supply infrastructure such as UK production, and pipeline or LNG imports.
Storage facilities cycle their capacity – injecting and withdrawing gas as required by the market. Therefore, unless restrictions on their use are put in place, storage facilities cannot be relied upon to have gas when needed by the market. However, they are an important source of flexibility, helping the gas market balance when demand is high.
Government takes gas security of supply seriously. Ministers therefore considered whether intervening in the gas market to encourage more gas storage could improve security of supply without adding disproportionate costs to energy bills.
The analysis, by Redpoint, concluded that the costs of intervention would far outweigh any benefit to security of supply, meaning that Government and consumers would be subsidising investment that large energy companies could pay for themselves...