Investing.com -- Centrica (OTC:CPYYY), the operator of the UK's largest gas storage site, has reported that the UK's winter gas storage levels are worryingly low due to a combination of extreme cold and high gas prices. The situation has been exacerbated by the cessation of Russian gas pipeline supplies through Ukraine on December 31, 2024. As of January 9, 2025, UK storage sites were 26% lower than the same period the previous year, with less than a week's worth of gas demand in store.
The UK's gas storage was already under strain heading into December due to the early onset of winter and persistently high gas prices. This has made it challenging to replenish storage over the Christmas period.
This issue is not unique to the UK. By January 7, 2025, European storage was at 69% capacity, down from 84% the previous year, despite many countries setting minimum storage levels ahead of winter. The UK's total gas storage capacity is around 10% or less than that in France, Germany, or the Netherlands.
Rough, the UK's largest gas storage site, has seen a 20% decrease in inventory compared to the same time last year, despite being full at the start of winter. The site has supplied almost 420 million cubic meters (mcm) of gas since early November, enough to heat three million homes daily. Without Rough's gas, UK consumers would face higher prices, increased imports, and potential energy shortfalls.
The UK relies heavily on Liquified Natural Gas (LNG) imports, primarily from the US. However, LNG shipments come with challenges, including geopolitical issues affecting trading routes. This places the UK in direct competition with other nations, particularly in Asia and Europe, for these vital shipments.
Chris O’Shea, Group Chief Executive of Centrica, has expressed concern over the UK's low gas storage levels. He highlighted the need for long-duration energy storage as the UK moves towards Clean Power 2030. He also emphasized the importance of investing in storage capacity as a valuable insurance policy against worst-case scenarios.
Centrica has proposed a £2bn investment to upgrade and redevelop Rough, which could save UK households £100 on their gas and electricity bills each winter if operating at full capacity. However, this investment is contingent on the implementation of a cap and floor model for the asset, similar to the model used for other forms of long-duration energy storage. If approved, the investment could also allow Rough to become the world's largest hydrogen storage facility in the future.
Recent reports from Centrica and FTI suggest that Rough could have saved consumers £5.2bn over the past two winters and could save consumers £1bn a year or more by 2050 if converted to hydrogen storage.
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