Why a new department should bring hope to UK energy

Rishi Sunak's splitting of BEIS and the creation of a dedicated Department for Energy Security and Net Zero under Grant Shapps brings new hope to the UK’s energy sector.


Secure, sustainable energy for the UK has been wanted for lack of vigorous political leadership. This news from Downing Street can only be positive. Alongside recent positive meetings with minister Graham Stuart and government experts, I am encouraged to believe the window of opportunity is at last opening for UK gas, hydrogen and energy – especially for a greener future.

The government must help industry build a new, national, energy-storage infrastructure – ‘vast and fast’. Disclaimer: my company, UK Energy Storage (UKEn), plans to build the UK’s largest hydrogen-ready salt-cavern storage facility at Portland Port, with significant benefits for the UK economy and energy security. We want support, so my interest is clear – as is my inside track on the numbers.

For some time, declining domestic gas production alongside rising demand has left the UK with an increasing shortfall of gas. We must buy to cover increased usage in winter (‘winter exposure’). Filling this gap relies increasingly upon open market imports, leaving us vulnerable to variations in supply and demand.

While gas prices have dropped in recent months, the problem remains. To respond, as some politicians do, with ‘it’s not about energy security, just about energy prices’ seems naïve at best, when 40–60% of electricity generation in the UK comes from burning gas, National Grid was recently contemplating rolling black-outs across Britain, and the government will have paid at least £18bn in energy subsidies this year alone. What happens next winter?

Storage is the answer. The EU, Germany in particular, have long used storage to provide their winter supply. Clearly, this model works for countries with low domestic gas production. It also provides a model for the backbone of any future hydrogen economy.

But existing UK gas storage can provide only about one week’s winter supply. Compare that with Germany’s gas storage, estimated at 100 days’ worth (maybe more) of winter supply.

Our analysis of the UK’s most recent numbers predicts that as domestic gas production continues to decrease, we will, by 2025-26 become even more exposed to importing from the market. Without more storage, by 2030, the UK’s winter exposure rises to an unprecedented 40% and by 2035 to 50%.

This is an unthinkable level of insecurity. The free market cares nothing for self-sovereignty, local economic collapses or power blackouts.

Looking forward, to maintain the UK’s winter exposure/supply shortfall at the current 15-25% requires that we add up to 5–8 billion cubic metres (bcm) of gas storage by 2030, and approximately a total of 8-12 bcm by 2035.

Even if Rough (the UK’s largest gas storage facility located under the North Sea) storage returns to the near maximum level of 2 bcm, that still leaves 3-6 bcm of new storage required by 2030, equivalent to 2-3 new Portland size facilities.

Our model builds in the government’s expected decline in demand for natural gas, as consumers switch to hydrogen and biogas. Yet these gases in turn will require more storage – especially hydrogen, for which National Grid forecast scenarios show a need for approximately 10 bcm of new storage by 2035, possibly much more.

Because natural gas and hydrogen are both so important, it would be sensible to require that all new natural-gas storage infrastructure be hydrogen-compliant (and vice-versa), for a modest increase in capex, which we estimate at 5-10%.

UKEn’s Portland Port project will provide one-tenth to one-sixth of the UK’s entire gas-storage need (possibly, double that later). It is a low-hanging fruit. By comparison, most current onshore sites provide, at best, around 20-40% of the capacity of the first phase of Portland. Therefore, the overall UK need requires investment of £8-12bn or more. That cost is still substantially less than three months of energy-price subsidy at current rates.

What has been missing until now is the political impetus to drive tangible government assistance. Decisions by the new Department for Energy Security and Net Zero to support (or not) the building of new gas and hydrogen storage and distribution infrastructure will have a wider impact on the UK than UKEn and far ahead into all our children’s lifetimes.

Let us hope that a new department means real progress can finally occur.

Stephen Sanderson is CEO, UK Energy Storage (UKEn)

17th February 2023