Energy: Gas Storage

Baroness Verma Excerpts

Thursday 28th November 2013 Lords Chamber

[Baroness Worthington]

To ask Her Majesty’s Government what assessment they have made of the adequacy of the United Kingdom’s gas storage and its effect on consumer and business energy prices.

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)]

My Lords, four new storage facilities are either in operation or will soon become operational, which will increase the capacity of our gas storage by over 20%. In addition, they will nearly double the rate at which storage can deliver gas into the gas system, and there are further projects in the pipeline beyond those. DECC has considered whether incentivising storage would bring wider price benefits and we have concluded that the evidence for benefit is not sufficient to justify that, as potentially it would put great costs on to the consumer.

[Baroness Worthington (Lab)]

My Lords, we have seen quite an extraordinary amount of flip-flopping from the Government about when it is appropriate to intervene in markets and when it is not. However, there is still no desire to stand up to the energy companies. It is true that in the UK our gas storage is at very low levels—less than a quarter of that in France and Germany. Will the Minister comment on whether she believes that to help address the cost of living crisis, the Government should now ensure investment in gas storage so that we can avoid the seasonal price spikes that come with increased demand every winter?

[Baroness Verma]

My Lords, I think that I have already stated to the noble Baroness that we have gas storage either in the pipeline or coming on line. We also have a robust and dependable gas interconnection through pipelines from Norway and the rest of Europe. Therefore the noble Baroness, who raised this point about the cost of living to consumers, should have thought about it during the 13 years her party was in government.

[Lord Jenkin of Roding (Con)]

My Lords, does my noble friend accept that the real case for more gas storage is to protect this country from spikes in the world gas price?

[Baroness Verma]

Indeed, my noble friend raises a very important question. That is why, through the Energy Bill, we have tried to ensure that we support home-grown energy. We need a mix of energy and we need it to come from various sources. That is the only way we will be able to tackle what we see as increasingly global prices.

[Lord Reid of Cardowan (Lab)]

My Lords, just so that we can be clear on the Government’s position, is it that when a market is not working, it is proper to intercede?

[Baroness Verma]

My Lords, the point of intervention is where we try to ensure that low-carbon generation gets the support to be able to supply energy at a cost that will be affordable to consumers. That is about ensuring energy security and cleaner energy, but also affordability.

[Lord Skelmersdale (Con)]

My Lords, I welcome the four new gas storage facilities that my noble friend spoke of in her original Answer. However, can she tell me when the first one was started?

[Baroness Verma]

My Lords, my noble friend asks a question about the date that I cannot answer exactly. However, I will write to my noble friend on that and put a copy in the Library.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, I am grateful to hear from the noble Baroness that the Government say that an increase in storage is on line. Will she be good enough to tell the House what the ultimate percentage is that they hope to achieve by creating storage, what the timetable is, and, if she does not have the figures available now, will she put them in the Library so that we can all see them?

[Baroness Verma]

Of course. As I said in my original Answer, we will see an increase of more than 20% in the capacity of gas storage. However, as the noble Lord asked for further figures, as my noble friend did, I will make sure that they are placed in the Library.

[Lord Roper (LD)]

My Lords, in the initial reply of my noble friend the Minister to the noble Baroness, Lady Worthington, she suggested that any further intervention in gas storage would raise prices disproportionately for consumers. Will she let us know the basis for that?

[Baroness Verma]

My Lords, we have carried out an analysis of the UK gas market to see the potential for intervention against potential shocks, and have found that there is a wide range of figures. However, they are still hugely substantial as regards the net benefit to consumers and the population as a whole.

[Lord Hylton (CB)]

My Lords, have the Government considered whether existing old gasometers could provide extra storage?

[Baroness Verma]

My Lords, as always, the Government constantly review what they are doing to ensure that energy is secure and that the lights stay on. Of course, these reviews take place regularly. However, we are working with Ofgem and National Grid, and are in constant conversation over those matters.

[Lord Lawson of Blaby (Con)]

My Lords, I congratulate the Government on increasing the amount of gas storage by 20%. I recall that when the party opposite was in government, I called for increased gas storage month in, month out, but it did nothing at all about it. However, 20% is not enough. Will the Minister place in the Library of the House the curious calculation that DECC has come up with, which says that any further increase in gas storage would be economically damaging, because it is highly implausible?

[Baroness Verma]

My Lords, my noble friend has asked me to place information in the Library, as have other noble Lords, and I will be very happy to do so. However, I reassure noble Lords that beyond what we are doing, further projects in the pipeline will be coming on line, so there is plenty going on. However, unfortunately, I am not able to provide dates at this moment in time.