The last week has shown up the weaknesses of our gas supply. Or the strengths, depending on how you look at it.
Gas prices spiked. But that’s the way the market works: at a time of shortage, prices rise and gas shippers divert their supply towards the highest prices. Yes, at times like that we are in a bidding war, and we’ll be paying out a high price for balancing volumes of gas. But most domestic energy suppliers should have bought in advance – the cold weather was forecast weeks ahead ( although the technical problems that affected specific gas feeds were not). Which of the energy suppliers were caught out, and forced to buy large supplies at the last minute, will become clear in the coming months.
But the cold snap has raised again the question of whether we need more gas storage. And maybe we do.
Although let’s not forget that we are a transit point for gas to Europe, and there is no guarantee that gas in store in the UK would not be shipped across the channel in the event prices peaked higher there than here. Nor should we forget that some of the gas in the large European stores we look at with such envy can be shipped to us (strategic reserves aside) – assuming that technical issues do not interrupt the flow.
Still, with our largest gas store at Rough now at the end of its life, and North Sea supplies winding down, more storage may be necessary. But how much, and where, needs a lot more consideration. We need to consider a handful of important issues before deciding on that.
How much? Much of the gas we use is for domestic heating. One of the worst pieces of knee-jerk government action in recent years saw domestic energy efficiency programmes slashed to save a few pence off energy bills. That decision should be reversed immediately. Warm, well insulated homes won’t cut gas use to zero, but it will take a good slice off our demand on this expensive cold days, and make it easier to maintain gas supplies because there will be less of a gas surge as people arrive home and switch on to warm up cold homes. Insulation really is storage.
What about flex? The government’s aim of a smart, flexible energy system applies to gas just as much as electricity. Inviting industrial gas users to bid to reduce their intake worked very well last week, just as it does in the power market. Large users don’t do this as a charitable enterprise. They offer a price that suits them, and if they are called on they are paid for their service. (Some might have been planning on turning down anyway, if they have some exposure to spot prices.) This is smart flexible response. How much is available?
Where is it needed? Part of National Grid Gas’s problem in balancing the gas system is that the network was set up expecting flows from terminals in the north to demand further south. NGG’s venerable fleet of compressor stations, which pumps gas around the country, is working extremely hard to get gas to where it is needed from new sources like LNG terminals in Kent and Wales. That’s the reason NGG calls for local balancing offers. Where should storage be best placed to address this problem? Would a single large site work, or should there be several strategic locations?
What is storage? Taking a step on from the locational issue, we need to consider distributed storage. CHP offers storage. AD plants injecting biogas into the system from waste can offer storage. Gas or heat stores on industrial sites offer storage. There is a lot to be done at the distribution level to chip away at the need for large, costly centralised storage (onsite batteries compared to Dinorwig, if you will) and it can be deployed much more quickly. There is an important role here for local Gas Distribution Networks (GDNs).
And one more thing. We have two distinct types of gas supply: a bulk, high pressure system providing power plants, industrial users and local gas networks with supplies. And those local GDNs that feed small power plants and CHP units as well as domestic users. The future of the gas distribution networks is very much under discussion as we start to grapple with the problem of decarbonising heat. They may disappear in some areas, or be repurposed to transport hydrogen, or heat. That too will affect how much gas we use and how it will be transported and it’s not yet clear how (a big switch to hydrogen might mean more gas in the high pressure network).
It’s quite likely that more storage will be useful for us. But before we start on a long and expensive road, (such as hollowing out another gas cavern in Cheshire), let’s think properly about exactly what storage we need, and where, in what may be a more distributed and flexible system.