Britain's failure to invest in new gas storage capacity has left the country vulnerable to peak winter supply interruptions, argues Conservative MP Stephen Crabb ahead of his Westminster Hall debate on the issue.
I will today use a debate in Parliament to highlight the increasingly important role of gas storage in maintaining UK energy security and the pressures on the current system due to inadequate capacity.
The UK has been a net importer of natural gas since 2004 as North Sea production has declined. By next year gas imports could be meeting more than a third of the UK's total annual gas demand, potentially rising to around 80 per cent by 2020.
At the same time gas is becoming more important overall within the UK energy mix, as ageing coal-fired and nuclear power stations are decommissioned. Consequently, security of UK gas supply is set to become a key political issue in the years ahead.
The recent dispute between Russia and the Ukraine highlighted the geopolitical dimension to energy security as supplies were disrupted to key European markets. During the period of the dispute, UK gas stocks were rapidly depleted as large volumes of gas were exported from the UK to Belgium through the gas Interconnector to help meet the short-fall elsewhere.
The unusually cold winter has also exacerbated the tight supply scenario and, before this winter is through, UK gas reserves could all but run dry as stored gas gets used to help meet peak demand. In fact, in each of the last four years the gas held in storage has reached new lows at the peak point of UK winter demand.
The current situation represents an enormous failure to plan for a new post-North Sea energy future. Ministers have been hugely complacent about the ability of the market and the planning regime to deliver new storage capacity in a timely way. No new gas storage facilities became operational in 2007 or 2008.
In October 2008, the Business and Enterprise Select Committee reported: "The government has not responded quickly enough to the UK's increasing, and entirely predictable, gas import dependency by encouraging investment in storage... Significant additional storage, beyond that currently planned, is needed to reduce volatility in the wholesale gas price, which is otherwise likely to increase as the UK becomes increasingly dependent on gas imports."
While the government points to steps taken in the Planning Act 2008 to speed up the delivery of gas storage projects, the truth is that these will not begin to take effect until more than a year from now.
In the meantime the existing planning regime and the impact of the financial crisis are dramatically reducing the likelihood that adequate new capacity will be forthcoming in the next five years. In recent weeks a number of key planned storage projects have reportedly encountered financial difficulties.
The immediate outlook then is set to be one of increasingly tight winter supply conditions with consumers picking up the bill as gas prices soar during the peak season.
If UK gas reserves prove inadequate, ministers will be crossing their fingers that additional imports will come to the rescue. However, as was shown in the winter of 2005/06, imports from Europe can be difficult to obtain due to a combination of regulatory, commercial and infrastructure constraints.
Dods Parliamentary Communications Ltd