Government must double gas storage capacity or risk energy security, Committee says

In a report on the security of the UK's energy supply, the Energy and Climate Change Committee said that the Government should aim to "double" its storage capacity by 2020 to avoid exposure to supply interruptions and price spikes.

The country's current storage capacity amounts to only 14 days' worth of gas supply compared to 87 days in France and 69 in Germany, according to Government figures.

The Government's White Paper on Energy Market Reform (EMR) (142-page  / 1.8MB PDF) proposes the introduction of a 'capacity mechanism' designed to ensure that power stations are kept on standby to cope with emergency demand surges and the unreliability of some renewable electricity generation methods, such as wind power.

The Committee said in its report that this could not be done without Government intervention in the gas market.

"Doing nothing – or continuing to give inconsistent signals to the market about which approach it will choose – could result in no storage being built. This would diminish energy security," it said.

It added that it was "not convinced" that the current proposals struck the right balance between encouraging investment in new gas-fired plant and the need to decarbonise the energy industry to meet international targets over the next decade.

"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," said committee chairman Tim Yeo.

The UK will lose around 25% of its electricity generation capacity in the next decade due to aging plant and environmental regulations, according to figures from regulator Ofgem. In addition, an increasing amount of the country's power will be generated from intermittent sources such as wind.

The Committee said that this energy 'gap' would most likely be filled by planned new infrastructure, but added that the Government needed to ensure it obtained its energy from diverse sources to avoid becoming too reliant on fossil fuel imports or any one single technology at home.

"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," said Yeo.

The MPs also called on the Government to publish a set of energy security indicators as promised in the Strategic Defence and Security Review.

These 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, they said.

They urged the Government to be more transparent and open to public challenge on the 'early warning' signals that it uses to assess risks to energy security.

It added that a new £2 billion levy on North Sea oil and gas producers announced in the latest budget had undermined investor confidence in the sector.

The new tax was an "opportunistic raid" that could put the security of UK energy supply at risk, the report said.