Empty spaces: is there a case for new gas storage?

Overview of this week’s Energy Spectrum publication

In this week’s Energy Perspective, we explore the implications of recent gas supply incidents and ask the question – do we need more gas storage?

Historically, the GB market has lacked the gas storage capacity of its European counterparts. This was brought into sharp focus after the closure of Centrica’s Rough storage facility followed by disruptions to production and supply in the UK, Continental Europe and Norway in early December. This reignited the debate on the value of storage.

Those developments in December highlighted different ways in which storage’s value can be assessed. These include the geographical nature of an asset and its proximity to the UK market and the ability of storage to serve as an insurance policy to help security of supply. However, this insurance element is the most difficult to access because higher and more volatile gas prices will inevitably feed into end user bills. This in turn impacts the need to invest in the gas network to meet the needs of new import projects, once again impacting bills.

The government has periodically looked at whether it needs to intervene directly to secure gas supplies and 27 January saw BEIS Minister Richard Harrington confirm a further review of the nation’s strategy in this area. With there already having been a review in October 2017, one following so soon after could indicated that a re-think is on the cards.

In this week’s policy section, we look at some of the key points raised in the Lords’ Economic Affairs Committee evidence session into the economics of UK energy policy. Much of the discussion revolved around nuclear. Business and Energy Secretary, Greg Clark confirmed to ministers that the government remains committed to new build nuclear and that any delay to Hinkley Point C would not pose a risk to security of supply.

We also break down the National Audit Office’s (NAO) report into the Renewable Heat Incentive (RHI). The NAO concluded that the scheme has “not achieved value for money” in GB – with take-up lower than expected and renewable targets and carbon reduction goals watered down. We find the assessment delivered was mixed but fair for a scheme that has had both its challenges and successes.

In our regulation section, we look at the significant speech given by Ofgem CEO, Dermot Nolan at the launch of Sustainability First’s Project Inspire report. The report itself highlighted how innovation can bring significant benefits to vulnerable customers. Through his speech, Nolan provided detailed, mostly supportive responses to the 18 report recommendations while noting that the regulator may well decide to leave a protection for vulnerable customers in place after the government’s wider cap is withdrawn.

In our industry and markets section, we look at EDF Energy’s full year financial results, which showed an operating loss of £3mn for 2017. Lower electricity output and lower wholesale prices were cited as being behind this. Despite the loss, the supplier has seen strong domestic customer retention when compared to its large competitors over the last year.

In this week’s Nutwood, Cornwall Insight Associate Peter Atherton breaks down Centrica’s 2017 results, which saw a 17% fall in total adjusted operating profit with its biggest problem coming within its B to B businesses in both the UK and North America.

Our Energy Spectrum service comprises two publications designed to ensure you stay ahead of the game:

  • The Daily Bulletin – providing you with up-to-date information, collating the most important political, regulatory and industry developments from the previous 24 hours
  • Energy Spectrum – offers the latest news and expert comment and is seen as an essential source of analysis and insight on developments in the British energy markets

Related thinking

Low carbon generation

Our Renewables Pipeline Tracker: In with the new – scoping projects and progression through planning stages

Our latest Renewables Pipeline Tracker was published on 11 June, and this blog provides a summary of some of the recent developments in our coverage of the pipeline for new build and repowering renewables assets in GB. What’s new? Seabed leasing rounds, scoping projects and CfD announcements Since our previous...

Net zero corporates and ESG

Get ready for climate risk reporting?

On 30 April we released the latest copy of our Energy net zero. The publication takes an in-depth look at the UK's transition to a low carbon economy. The below is an extract from our Energy Perspective on Task Force on Climate-related Financial Disclosure (TCFD). The article was originally published in the...

Regulation and policy

Calm before the storm? 2021 energy supplier compliance developments

The latest update to our Energy Supplier Compliance Portal went live on 4 May and includes changes to the compliance landscape during February to April 2021. While the previous quarter’s update reflected new principles resulting from Ofgem’s Supplier Licensing Review (SLR) and protections for prepayment meter customers facing self-disconnection, Q121...

Low carbon generation

How nuclear energy can help the UK reach its net zero goals

This article was originally written in Energy Spectrum on 21 March 2021. To find out more about a subscription to Energy Spectrum, please contact Nick on n.palmer@cornwall-insight.com. There are several challenges to reaching net zero, where its proponents believe nuclear could add value. Some of tomorrow’s main issues concern: How to provide low...

Low carbon generation

Nuclear energy and its potential importance for net zero

This article was originally written as a longer piece in Energy Spectrum on 21 March 2021. To find out more about a subscription to Energy Spectrum, please contact Nick on n.palmer@cornwall-insight.com. Nuclear energy has been an integral part of the UK’s electricity system for many decades. Currently, nuclear provides around...


Introducing Energy Spectrum Europe

Cornwall Insight is pleased to announce the launch of Energy Spectrum Europe. This new addition to the Energy Spectrum stable will provide the authoritative, independent insight and analysis of energy markets for which its peers covering Great Britain, Ireland and Australia are rightly renowned. Every month Energy Spectrum Europe will...

Regulation and policy

Answers to some FAQs about Brexit

Following the end of the transition period on 31 December 2020 and the signing of the Trade and Cooperation Agreement, aspects of the relationship between UK and the EU in respect of the arrangements for energy trading and cooperation have changed. We set out answers to some Frequently Asked Questions...

Commercial and market outlook

A look back at 2020

As we take our first steps into 2021, we look back at the biggest developments in the UK energy markets in 2020, setting us up for the significant year ahead. As 2019 turned into 2020, we were still waiting for the Energy White Paper (EWP), a document which had been...