Centrica has blamed the UK government for its decision to pull the plug on its involvement in two gas storage facilities, writing off over $384m in investment.

The company said it would not now pursue the $2.4bn new-build gas storage project at Baird off the coast of Norfolk and put its project at Caythorpe in East Yorkshire on hold indefinitely.

Centrica said the decision by the government to rule out subsidies to boost storage led to the move to cancel its interest and added that it was taken “in light of weak economics”.

Centrica sign
The gas industry has been vocal in its criticism of the move, pointing out the implications for Britain’s energy security.

The UK can store gas equivalent to just 19 days of demand, according to a report by storage business Gateway. Germany, France and Italy have capacity to store an average of 97 days, although they have less domestic production.

Britain came within six hours of running out of gas in storage in March during an extended cold spell, sending prices higher.

In a statement to PEi, Nick Woodward, Sector Lead at Moorhouse Consulting said, “Whilst the decision conveys a strategic focus and associated decision making at Centrica, what does it tell us about the future of the energy market? One of the country’s leading energy companies is choosing not to invest in long term assets in the UK.”

“This reliance (on imported gas) will only increase as more gas power plants are built to overcome the looming power generation shortage. The result is that consumers and businesses will increasingly be at the mercy of global markets and energy investment policies driven by the returns the world’s largest energy corporations can make throughout the globe.”

Woodward added that the UK was losing control of its policy levers and said it had become apparent that where politics and markets mix, medium term returns companies can make from their investment choices, dictate the long term investments the politicians can afford for the future – and if market prices become unaffordable locally due to global demand, it will be too late to invest for security in the future.

“For years now, the UK has reported the impending energy crunch and faces the prospect of continuously increasing energy bills. As the parties argue about the “cost of living crisis”, and winter approaches again, we should continue to demand more from all our parties on what they are going to do to encourage investment in the UK to ensure energy supplies that are secure, affordable and sustainable.”

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