UK energy crisis: Former minister urges UK Government to invest in gas storage and stop relying on 'luck'

Former UK energy minister Charles Hendry has warned the government to stop relying on “luck” to keep gas flowing and urged it to invest in storage to ensure security of supply and to keep the lights on.

A former Tory MP, Mr Hendry said the UK Government and energy watchdog Ofgem needed to stop pitting consumers against the industry, and £100 billion was needed to invest in the UK’s energy network to future-proof it from crises.

He said prices would continue to rise if there was no new strategy for the long-term supply of UK energy, hitting the poorest hardest, and admitted the market could not solve the current emergency.

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Energy crisis: Warning of higher bills next year as Scottish Government urged to...
Business secretary Kwasi Kwarteng has said gas prices might remain high for the long term.

His remarks came after UK business secretary Kwasi Kwarteng said preparations were being made for gas prices to remain high for some time, despite Boris Johnson previously describing the problem as "temporary”.

Mr Kwarteng, who has previously admitted families will face a "difficult winter" with rising energy bills, denied the Conservative administration had “been complacent” as suppliers collapsed.

The Cabinet minister said Ofgem’s concerns had been “interrogated” during the coronavirus pandemic, while the supplier of last resort programme, where consumers are automatically transferred to a new provider if their supplier exits the market, was “found to work”.

First Minister Nicola Sturgeon has said she is “extremely concerned” about the rise in energy prices and its impact on consumers and chaired a meeting of the Scottish Government resilience committee on Thursday to discuss the issues.

The energy price cap is set to rise by £139 a year to £1,277 for a typical gas and electricity customer from October 1, with further record rises expected next year.

Mr Hendry said the collapse of several small energy companies had been “predictable” and that gas storage would have helped “smooth” the global spike in prices.

He also warned investment needed to be made in constructing new interconnectors between Scotland and England to ensure that Scots would not see their energy supply disrupted when renewables are unable to meet demand.

“I have said for many years, going back to when I was a minister, that we don’t have enough gas storage in this country,” he said.

“That was before the closure of the Rough field in the North Sea in 2017, which reduced storage capacity by more than half.

“If we had started doing this six or seven years ago we would have doubled our gas storage facilities by now and while it would not have resolved the current situation, it would have alleviated it as gas could have been bought at a lower price and stored for just this kind of crisis and given us a level of insurance.

"Of course now it’s too late to be building that storage, but it still must be done for the future to ensure we have energy security.”

He added: "I’m not saying we’re going to run out. I don’t think we’re in a situation where people’s lights in their homes, or the gas in their homes, will not go on.

"But it could yet impact large business consumers, such as chemical companies, cement works, many of whom have agreements with suppliers about coming off line when supplies are tight.”

Mr Hendry, who is an honorary professor with Edinburgh University’s Business School and chairs SP Energy Networks’ user group, said while he was energy minister in former prime minister David Cameron’s government there were two occasions when gas supplies ran very low because of external events – a fire in a pumping station bringing in gas from Norway, and the Russia-Ukraine dispute.

He said he was told investing in gas storage would have pushed up people’s bills, but he added: “Of course there is always a worry about fuel poverty, but it would have been by a small amount whereas now people are being faced with big increases and the most vulnerable will be hardest hit.

"The market works perfectly well until the day it doesn’t work at all and then things are catastrophically wrong. My view is energy is too critical to national security, to people’s wellbeing, to British society, to be left to the market.”

He added: “There’s a sense that if you’re on the side of the consumer you have to be against business, and vice versa, but that is a false debate. We need £100bn investment into the UK's energy infrastructure – we can’t go on with a system dependent on luck.

"We used to say the North Sea was our gas storage – that we would just pump out more when needed – but that is now in long-term decline and, of course, the green agenda means we should be using less as well. We need real gas storage facilities.

"Scotland can be self-sufficient in energy given its renewable resources, but it needs to be able to export energy to England, and there are times when the wind doesn’t blow and the sun doesn’t shine so it will need to import electricity the other way, so new interconnectors are vital.

"At the moment there’s one between Hunterston and Liverpool, we need several being built over the course of the next decade if we are going to be able to decarbonise the system and move to a low carbon economy.”

Mr Hendry said a mild winter could ease the situation, but added: “We still need to learn lessons from this situation, to seek investment, to have a strategy, to encourage innovation for instance to create gas storage that can also be used for CO2 to help the food industry.

"I am frustrated because I tried to get more done and I would encourage the government to act now to prevent similar situations arising in future.”

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