Government urged to increase gas storage to ensure energy security
The UK needs to double its gas storage capacity by 2020 in order to safeguard energy supplies and tackle price hikes, a group of influential MPs have warned in a new report.
According to the Commons Energy and Climate Change Committee report, the UK has the capacity to store just 14 days worth of gas, which the committee says is a vital component of energy security. They argue this must be increased to reduce supply disruptions which could harm the economy and result in sudden price increases for customers.
In contrast to the UK's storage capabilities, France has 87 days worth of gas storage; Germany has 69 and Italy 59.
While the report states that "it is inevitable" that the UK will become increasingly reliant on energy imports - as supplies from its offshore oil and gas sources decrease, the committee argues this is not a threat to energy security provided the government does not rely too heavily on a single supplier or fuel from stable and unstable parts of the world.
The report states that energy security can be "maintained by a diverse energy portfolio that does not rely too much on either a single supplier or a single fuel".
Chair of the committee Tim Yeo MP, said that while the UK is "reasonably" energy secure that encouraging investment in gas storage will "improve our position and help to reduce the impact of rising global energy price rises."
However, the Government has been criticised in the report for hitting the UK's continental shelf oil and gas producers with a £2bn levy in the 2011 Budget, which the committee argues may have "undermined investor confidence".
Mr Yeo said: "In an uncertain world the UK needs to think hard about its energy security. The UK will become more dependent on energy imports as North Sea oil and gas declines, but prudent planning can ensure this doesn't reduce our energy security too drastically."
The committee has now called for the government to think strategically about the UK's energy supply to ensure it is "resilient to both short-term shocks and longer-term stresses", arguing that it became clear during the inquiry that an agreed definition of energy security was lacking.
As well, the report has proposed that "strategic" gas storage should be built to hold gas stocks that can be released in an emergency, in addition to seasonal fluctuations.
It suggests three main types of underground gas storage could be used, including injection into water aquifers; into depleted oil and gas fields; and salt caverns, which together are described as underground gas storage (UGS).
Furthermore, the committee has said it is not convinced that the government's Electricity Market Reform White Paper strikes the right balance between encouraging investment in new gas-fired power stations in the short term and the need to decarbonise the power sector by 2030.
The proposed Emissions Performance Standard (EPS) could have been used to set out that pathway, but in its current form MPs warn that it could lock the UK into a high-carbon, gas-dependent electricity system.
The committee concludes by calling on the government to publish a set of energy security indicators as promised in the Strategic Defence and Security Review, which they say should cover primary fuel supplies, energy infrastructure and energy users and include specific indicators on the overall level of energy demand, diversity of fuel supplies, energy prices, fuel stocks, spare capacity and capacity for demand side response
Mr Yeo MP added: "Electricity market reform is urgently needed to set the right long-term framework for energy companies to reduce the UK's dependence on increasingly expensive fossil fuels. Worryingly the Government's current proposals fall short of what is needed."