Richard North, 22/09/2021  
 


In February 2006, in the midst of a hard winter, we were experiencing problems with our gas supplies. On the 16th, therefore, the issue was raised in parliament, when the then Labour minister for energy, Malcolm Wicks, was asked, "What measures are in place to increase capacity for gas supply and storage in the UK". Wicks trotted out a reassuring answer, telling the Commons:
By 2010, Britain's gas market will have received some £10 billion of investment in new gas storage and import projects. In addition, we intend to bring forward legislation to facilitate innovative new offshore storage and supply projects. We are also working to ensure that there are no unnecessary non-commercial barriers in the existing regulations to new onshore gas storage projects.
In the short debate which followed, there was an intervention by Conservative MP Alan Duncan, who asked: "After eight years in office, what is the Government's policy for establishing onshore strategic energy stocks that stand a chance of lasting more than 11 days?" Wicks answered:
We have not only a policy but practice. Next winter, Britain's import capacity will be double today's figure. By winter 2009–10, it could be trebled. Investment in new gas stocks is increasing all the time. We will have more capacity for storage next winter and the following winter than previously.
The situation, however, continued to deteriorate and on 14 March 2006, MPs were back in the House to hear a statement from the secretary of state for Trade and Industry, then Alan Johnson, on gas market prices and supply and demand.

The National Grid, the previous day, had issued a gas balancing alert "in response to an increase in gas demand due to the cold weather, exacerbated by problems on the supply side with the Rough storage facility being out of operation, and low delivery through the interconnector at the weekend." That, Johnson admitted, had resulted in "a significant call on short-range gas storage and the resulting spike in the gas price".

In the following debate, Alan Duncan again intervened, referring to his previous question on gas storage and the answer which indicated that "we have very little storage and will not do so for some time. That largely explains why Britain is so acutely vulnerable to the sort of extreme price spike that we are facing today".

But what also characterised the short debate was an intervention from a Lib-Dem MP by the name of Ed Davey, who stormed into Johnson, demanding:
Have the Government not been negligently complacent about Britain's gas crisis, especially the lack of gas storage infrastructure? When Germany has storage facilities for 75 days and France for 66 days, is the right hon. Gentleman not just a little embarrassed that without Rough the UK has storage capacity for only 12 days?
He then finished off his tirade, calling for Johnson to confirm that Ministers had been warned about the danger several times in recent years. "Is not it the case that if we had those extra facilities, gas prices for UK industry would be lower today and the alert would not have taken place?" he asked.

Nevertheless, plans were in hand to increase storage capacity which, in 2009 stood at about 4 percent of average annual consumption, or about 14 days' worth. This compared to Germany's reserves equivalent to 21 percent of annual consumption and France's 24 percent. This, said the Guardian at the time, "makes the UK, which imported about 40 percent of its gas last year, more vulnerable to supply disruptions. As North Sea output declines, Britain is expected to import up to 80 percent of its gas by 2015".

The concern at that point was that plans to build vital facilities to help Britain secure its energy supplies were in doubt as a result of the credit crunch. Stag Energy, the form involved, warned that the credit crunch was "making it harder to raise the £600 million for the Gateway project to build a storage facility beneath the Irish Sea".

Andrew Hindle, chief executive of Stag, urged the government to consider introducing a storage obligation on gas suppliers to speed up construction. This would require suppliers to store a proportion of their gas in the UK. "A storage obligation exists in some countries in Europe and it is being looked at by the EU", he said. "It could be the solution to ensure that there is enough storage built in Britain".

Five years previously, Ofgem had predicted that the UK would have built 10 billion cubic metres of storage capacity by the end of the decade. But the current capacity was then only about 4.3 billion cubic metres. We could rest easy in out beds though. Ed Miliband, then the secretary of state for energy and climate change, was "understood to be looking at the issue".

However, it was not to be this Ed who looked at the matter, but another one, Ed Davey, the man who in 2006 had been so concerned to ensure the adequacy of gas storage. And having been appointed the Secretary of State for Energy and Climate Change in Cameron's coalition government, he was in a position to do something about it.

Already, in 2011, the energy and climate change select committee has noted that the UK currently consumed about 100 billion cubic metres (bcm) of gas per year, but only had the storage capacity equivalent to a little over four percent of this.

In the past, its report said, the UK could meet changes in demand by increasing or decreasing output from the North Sea and East Irish Gas fields, however, "these offshore fields are rapidly depleting and the market is losing its ability to respond flexibly". The committee thus observed that "many witnesses [that gave evidence at the inquiry] thought that the UK probably needed to double the amount of gas storage it currently has (about 4.4 bcm) by 2020".

Yet, on 4 September 2013, after a review of the storage issue, in a written statement to the Commons, he turned away from the idea of the government encouraging more provision, saying: "the costs outweigh the benefits", dismissing the prospect be declaring: "we see no clear case for a further intervention in the gas market". Supporting his boss was minister of state, Michael Fallon, who in a press release stated:
It is up to industry to get on and invest in building gas storage, and they are doing so. Two gas storage facilities have recently been built and two more are under construction.” Industry is already investing in building new gas storage facilities: Two storage facilities were opened at Aldbrough, Yorkshire in November 2012, and Holford, Cheshire in February 2013. Two more facilities are under construction at Stublach and Hill Top Farm, both in Cheshire, and will be completed in early 2014.
Thus, he complacently declared: "Once these facilities are complete, the capacity of UK storage facilities to meet peak demand will have doubled since 2000".

Nevertheless, Davey was challenged in a debate later that day by Labour's Joan Walley, who opined that it was: "absolutely essential that the Secretary of State reconsiders his Department's stance on gas storage", telling him, "We urgently need a change of policy on extra gas storage". Davey's response was still dismissive:
We looked at gas storage in huge detail to see whether there was a case for Government intervention, but we found that an awful lot of gas storage was being built with more modern technology, which means that the gas can be produced and brought into the pipeline network much more quickly. We have looked at that matter in detail and we do not intend to review it.
But even then, the writing was on the wall, with Reuters reporting in November 2013 on the volatility of Russian gas supplies. A contract dispute between Kiev and Moscow had spurred Russia to shut a pipeline serving central and south eastern Europe in 2009, leaving hundreds of thousands of people without heating in freezing temperatures and forcing businesses to shutter. Governments in the region feared that a renewed row between Ukraine and Russia could disrupt supplies again.

Although Britain usually did not use much Russian gas and would only get it through re-exports from continental Europe, its dwindling North Sea reserves meant that it increasingly relied on overseas imports from for instance Norway, through shipped liquefied natural gas (LNG), but also from continental Europe.

In 2009, shadow energy secretary Greg Clark had thought, "The government is being complacent and careless in saying that this will have no effect in the UK". He added:
North Sea gas output has been in decline for several years and by 2020 the UK will be importing 80 per cent of its gas. Against that background the UK needs to develop significant gas storage; but while Germany has 99 days of gas storage capacity, France has 122 days, Britain has just 15 days now and even on the government's own projections will have only around 30 days by 2020.
However, this time round, Ed Davey was not dismayed. "We monitor the security of our gas supplies. We've got our own supplies, supplies from Norway, supplies from the continent", he told Reuters.

In April of the following year, though, when it was being pointed out that a quarter of Europe's gas supply was coming from Russian pipelines, Davey declared that:
It can't be right for Russia to hold individual countries to ransom. This is an issue we cannot allow to go off the table … We have got to look at everything, from more diversified supplies of gas, whether it’s from the US, from shale, or helping other countries who are demanding a lot of gas now but who needn't. Maybe Japan will turn on some of its reactors.
Gas storage companies were not happy. The Times had them hitting back at his comments on energy security. After the September announcement, Centrica had cancelled its £1.5 billion Baird gas storage project off the coast of Norfolk, which would have increased Britain’s storage capacity by a third. ENI’s Deborah project in the southern North Sea had also been scrapped.

Referring to Davey's comments about gas storage, Roddy Monroe, chairman of the Gas Storage Operators Association, said: "It's a shame he is not joined up with ministers who had a perfectly good opportunity - there were a number of projects which were ready to go". He added: "It's disappointing that when those arguments were made to Department of Energy ministers they fell on deaf ears. The government had a very good opportunity to address this last September and it failed to do so".

Monroe said that it was too late for the Baird and Deborah projects to be revived as the gas fields were so depleted that, technically, it would be too difficult to convert them into storage facilities. The £1 billion Gateway project in the Irish Sea also remained in limbo because of the lack of government support. George Grant, director of Stag Energy, a storage group, said: "The words from the secretary of state are encouraging but they are not going to precipitate investment".

Nevertheless, Davey was to repeat his views in a speech on energy security 10 June 2014, when he declared: "Where the market is functioning well, and intervention would add unnecessary costs to consumers, the right thing to do is to stay out - not intervene - the approach we chose on gas storage".

That had become the government's definitive and unchanging policy on gas storage, surviving through in to Cameron new 2015 government, the man who in 2006 had travelled to the Arctic to hug a husky.

Two years into Cameron's tenure, though, and the fundamentals of Davey's policy were continuing to fall apart. Britain's largest gas storage site, the Rough facility off the Yorkshire coast, was being closed down by British Gas. "Closure of UK's largest gas storage site 'could mean volatile prices'", headlined the Guardian.

Analysts at Barclays were cited, saying that "the closure would increase the volatility of winter gas prices". This view was shared by other industry-watchers. Matt Osborne, a risk manager at energy consultancy Inenco, said: "We anticipate that the decision to close Rough will create uncertainty in terms of energy pricing". He went on to say: "Though we haven't seen a material impact on prices yet – most probably because there is still a significant amount of recoverable gas in the field, which could last for years – the pressure could come in the winter months, especially if we experience very cold conditions".

Despite this serious setback, which would wipe of nine days-worth of reserves, Davey's policy continued unchanged through May's administration, to the present day whence it has been embraced by Boris Johnson.

This fool now believes that the energy crisis is a "short-term problem" caused basically "by the huge demand in Asia". It also showed that "the UK was right to be moving to renewable energy".

Meanwhile, Ed Davey has been reinventing himself as an energy policy critic, writing in the Guardian: "Britain’s energy crisis has been years in the making, thanks to the Conservatives". But, while he admits to being a "former energy and climate change secretary", his critique starts in 2015, after he left office, complaining that "policies to insulate Britain’s homes and diversify our energy supply have stalled".

As secretary of state for energy and climate change, he was:
… proud of the role the Liberal Democrats played in weaning the UK off both coal and gas – for instance, when we nearly quadrupled the UK's renewable energy between 2010 and 2015. Our policies led to massive investment in onshore and offshore wind and solar, and brought in new standards for zero-carbon housing and tough regulations on energy firms to force them to promote home insulation to cut customers’ heating bills and tackle fuel poverty. From promoting district heat networks to pushing National Grid and Norway's StattNet to build the world’s longest subsea cable to link the UK to cheap hydropower, we were developing the low-carbon energy infrastructure to tackle climate change and improve the UK's energy security.
But nowhere in this self-serving tract is there any mention of the Davey gas storage policy of 2013. Despite his false claims on energy security, this has been airbrushed out of his personal history, breaking new ground in political duplicity.

But, while his deeds have been carefully sanitised, the effects haven't. Writes the Telegraph:
Mr Kwarteng's anxiety not to spook the markets or the country is understandable but there is a worrying nonchalance to many of the Government’s pronouncements. One criticism is that gas storage capacity has been allowed to dwindle to levels that many in the industry consider too low. The Rough storage facility in the North Sea, the UK's largest site, was closed despite warnings that it left the country vulnerable to precisely the difficulties now being faced.

Mr Kwarteng dismissed this as something of a sideshow yet Britain has far less gas storage capacity than many other European countries. Even if there is a welcome diversity of sources, a belt-and-braces approach is preferable to a "just in time" energy policy which is always at the mercy of events over which we have no control.
They get there eventually, after a fashion, as Ambrose Evans-Pritchard writes that the UK faces this energy crisis with no national strategic storage of gas in reserve. "It was not Mr Johnson who oversaw the closure of the main reserve at Rough off the Yorkshire coast but it was a Tory policy", he writes, "and it is he who will face the political consequences".

They're not quite there yet. The policy of non-intervention was a coalition policy, under a "hug-a-husky" prime minister. And its author was the man who is currently leader of the Lib-Dems. Funnily enough, the Guardian can barely bring itself to mention it.

Also published on Turbulent Times.






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