Labour reveals "Tories’ £1.7 billion gas storage mistake"

New analysis reveals the continued cost of Tory failure on energy security, as the choice to close Rough gas storage – before being forced to reopen it years later – has cost Britain £1.7 billion across last year and this year.

As far back as 2018, Labour’s Shadow Chancellor Rachel Reeves issued warnings on the impact on energy bills and security, as one of many voices raising the alarm on government short-termism.

Yet despite these warnings and having no plan for building energy security into the future, the Tory government closed Rough gas storage, making Britain more exposed to prices spikes abroad.

That meant soaring energy prices have hit UK households harder – with this costly Tory mistake leaving families shelling out more. With inflation persistently high over the last few months, the weekly food shop up and the Tory mortgage bombshell, households are facing the consequences of 13 years of Tory economic mismanagement.

With more storage, the UK could buy gas cheaply now, store it, and use it over the Winter when demand is higher. But because we don’t have that storage or alternative homegrown energy, we have been forced to buy now for delivery in Winter at a higher price.

Germany, Italy, the Netherlands and France all have gas storage capacity equivalent to 25 per cent to 37 per cent of annual consumption, while the UK’s storage capacity is equivalent to just two per cent of its annual demand.

Even after Russia’s illegal invasion of Ukraine made the reality of this insecurity clear and led to an enormous energy bills crisis in Britain, the government refused to admit till May 2022 that this was a mistake.

Rachel Reeves MP, Labour’s Shadow Chancellor of the Exchequer, said:

“Despite warnings this Tory government shut down gas storage and once again left working people paying the price for their sticking plaster approach.

“Yet another failure on energy security hasn’t just left families paying more, it’s left us exposed and reliant on others. 

“Instead of investing in homegrown energy to lower bills, create jobs and strengthen our energy security, they are happy to keep laying the costs on working family. 

“Built on the rock of economic responsibility, Labour will drive forward the industries of the future - working in partnership with businesses and workers – to sort out these Tory energy failures, get bills down and restore some economic security.”

Ends

Notes:

• The Rough storage facility stored 3.3 billion cubic metres of gas, equivalent to approximately 1.2bn therm.

https://ww3.rics.org/uk/en/modus/built-environment/resilient-infrastructure/why-has-the-price-of-gas-skyrocketed-.html#:~:text=Gas%20storage%20levels%20across%20the,storage%20capacity%20we%20once%20had.

• As of 30 May 2022, the price per therm of gas for delivery in June 2022, for storage to be used over the Winter, was 168 pence.
  
  
• As of 30 May 2022, the price per therm of gas for delivery over the Winter, was 251 pence.

https://www.theice.com/products/910/UK-Natural-Gas-Futures/data?marketId=5351157

• As of 19 July 2023, the price per therm of gas for delivery in June 2022, for storage to be used over the Winter, was 68.6 pence.
  
  
• As of 19 July 2023, the price per therm of gas for delivery over the Winter, was 125.7 pence.

https://www.theice.com/products/910/UK-Natural-Gas-Futures/data?marketId=5351157

• With more storage, the UK could buy gas cheaply now, store it, and use it over the Winter when demand is higher. But because we don’t have that storage, we are forced to buy now for delivery in Winter at a higher price.
  
  
• Based on the storage capacity of Rough, that means we are paying almost £700m over the odds for our Winter gas this year (£685.2 million), and we paid approximately £1 billion over the odds for our Winter gas last year (£967 million). A total of £1.652bn
  
  
• HSBC analysts recently wrote “Europe’s four biggest storage holders — Germany, Italy, the Netherlands and France — have gas storage capacity equivalent to 25 per cent to 37 per cent of annual consumption, while the UK’s storage capacity is equivalent to just 2 per cent of its annual demand. This means that the UK relies more on pipeline and liquefied natural gas imports (in addition to its own indigenous production) than other European countries.”
  
  
• Analysts at Wood Mackenzie, an energy consultancy, said “The UK is more exposed than virtually anywhere else because it is so short of storage”

https://www.thetimes.co.uk/article/gas-storage-policy-comes-back-to-bite-government-279v8v2jz

• When asked in September 2021 whether the Government’s decision to allow the Rough storage facility to close was a mistake, Kwasi Kwarteng, the Secretary of State for Business, Energy and Industrial Strategy, said “I do not think that it is relevant”.

https://hansard.parliament.uk/commons/2021-09-23/debates/A614998E-C040-4577-B66B-D7997556BEBF/GasPricesAndEnergySuppliers#contribution-BAECEFC8-E630-4B18-AE85-906384FF48D9

• In May 2022, the Government has finally admitted this was a mistake and is in talks about reopening the Rough storage facility.

https://www.thetimes.co.uk/article/millions-warned-of-power-cuts-this-winter-b7gl2ckx9

• In her role of Chair of the Business, Energy and Industrial Strategy Committee, Rachel Reeves wrote on 18 December 2018 to the then Minister for Businesses and Industry Richard Harrington MP, asking whether government was reviewing moves to close Rough gas storage with a view "to limit price volatility and keep prices as low as possible", also asking "What work is BEIS doing to ensure that, if we have a particularly bad cold snap again, people who are not on the grid will get access to gas."