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Energy: Gas

House of Lords written question – answered on 6th June 2011.

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Photo of Baroness Liddell of Coatdyke Baroness Liddell of Coatdyke Labour

To ask Her Majesty's Government what plans they have to increase the quantity of gas stored in reserve in the United Kingdom.

Photo of Lord Marland Lord Marland The Parliamentary Under-Secretary of State for Energy and Climate Change

Under the GB market arrangements commercial operators determine the volumes of gas held in storage.

Shippers, whose responsibility it is to ensure inputs and off-takes into the transmission system are exactly balanced, are incentivised to do so through the cash-out regime, which ensures they are charged at the system marginal price to the extent they are out of balance. Storage is one of a number of flexibility tools available to shippers to meet this balance; there are other supply side tools, such as imports from a diverse range of routes (LNG from global markets, pipeline from Norway and the Continent, domestic production) as well as demand-side measures-such as entering into interruptible contracts with their customers, or fuel-switching in the power sector. The extent to which shippers rely on any of these tools is a commercial matter, and a potential source of competitive advantage.

Government have brought forward proposals to sharpen these commercial incentives through Clause 79 of the current Energy Bill. Subject to parliamentary approval, the clause would confer on Ofgem the ability to make changes to the cash-out regime to reduce the duration, likelihood and severity of a gas supply emergency. In so doing, this should help underpin commercial demand for additional flexibility options, such as holding more gas in store.

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