Failure to Expand Gas Storage Costs UK Households £200 Billion
Britain's energy crisis has been exacerbated by the failure to expand gas storage capacity, costing households an estimated £200 billion. Centrica CEO Chris O'Shea suggests that Rough storage site expansion could have saved £5 billion through lower gas prices.
Amidst rising gas prices, households face an additional £100 annual bill increase. O'Shea highlights the market tightness and price surges, emphasizing that increased Rough storage capacity would have mitigated these increases.
The North Sea facility is designed to stabilize gas prices by stockpiling gas during summer and releasing it in winter. However, Rough has operated at reduced capacity since Centrica's 2017 closure and subsequent 2022 reopening in response to Russia's invasion of Ukraine.
Currently at 1.5 billion cubic meters capacity, Centrica insists that further expansion requires refurbishment. Despite years of talks with the government, a £2 billion investment remains contingent on a "cap and floor" mechanism that guarantees minimum returns while limiting profits.
O'Shea argues that the requested mechanism is not a subsidy, as it mirrors support provided to other energy infrastructure. However, critics raise concerns about taxpayer exposure to costs if Rough's returns fall below agreed levels.
Rough is currently expected to incur losses again. Centrica forecasts a £50-100 million loss in 2025, down from a £2 million profit in 2024 and £312 million profit in 2023.
With only 12 days of typical usage or 7.5 days of peak winter usage in gas storage, the UK lags far behind other European countries. Rough held 1.1 billion cubic meters of gas in December, down from 1.3 billion cubic meters a year earlier.
Criticism has been directed at the Conservative government for failing to prevent Rough's closure in 2017, while Whitehall sources privately assert that Centrica's support demands were excessive.