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A warning has been issued by the CEO of Centrica regarding the future of the UK’s largest gas storage facility. Chris O’Shea, the chief executive of the company which owns it, expressed concerns over the potential closure of the Rough storage facility if the government does not intervene to support its redevelopment. Centrica, the parent company of British Gas, has disclosed that the site is facing a projected loss of £100m this year and is seeking to invest £2bn in the facility to increase its capacity for storing gas, including hydrogen. While the government has stated that the fate of Rough is a commercial decision for Centrica, it has expressed openness to exploring proposals.
Situated off the coast of East Yorkshire, the Rough facility is responsible for about half of the UK’s gas storage capacity. Following its closure in 2017, the site was partially reopened in October 2022 amidst the energy crisis triggered by Russia’s invasion of Ukraine. Centrica recently announced that it is engaged in productive talks with the government to establish a support mechanism that would enable the investment in the Rough site to move forward. The company is advocating for a pricing mechanism labeled as “cap and floor”, which would guarantee revenue support if energy prices drop below a certain threshold, while also capping prices during spikes.
Chris O’Shea highlighted the imperative role that Rough plays in the UK’s gas storage, providing essential resilience levels. He emphasized that without the proposed investment, the facility would face decommissioning, resulting in a loss of this crucial buffer. Furthermore, he pointed out that the current gas storage capacity in the UK stands at only 12 days, with Rough contributing six days to this total. By maximizing Rough’s potential, the country could increase its storage capacity to around 25 to 30 days, enhancing its energy security. The Department for Energy Security and Net Zero reiterated that while the decision on Rough lay with Centrica, discussions on gas storage proposals would be entertained if they offer value for taxpayers.
In discussing the broader energy landscape, Chris O’Shea raised concerns about the impact of the existing energy pricing mechanism on renewable energy projects. He emphasized the importance of decarbonization and the economic prospects it presents, whilst noting the challenges ahead. The Department for Energy Security and Net Zero emphasized the feasibility of achieving a clean power mission by 2030, suggesting that it could lead to a more secure energy system and potentially lower electricity costs. Addressing a separate issue, Chris O’Shea acknowledged the pay row surrounding his salary, describing it as challenging and expressing gratitude for his position’s market rate, which exceeded his initial expectations
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