Policy paper

Gas security policy assessment

Assessment of costs and benefits of gas market interventions to ensure security of supply

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Documents

Gas security policy framework

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The impact of gas market interventions on energy security (Redpoint Energy)

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Details

The availability of gas supplies to the UK is set to meet demand over the next few decades, with the gas market continuing to function well in attracting supplies from a range of sources, according to new analysis by DECC.

The UK has the most liquid and one of the largest gas markets in Europe, with Britain’s gas supply infrastructure able to deliver more than twice the daily required amount of gas, (700mcm/day) when compared to average daily demand in the winter of 2012/3 (at 290mcm/day).

UK Import infrastructure capacity has also increased 5-fold in the past decade, with gas supplied to the UK from a diverse range of sources, with around half provided from UK gas fields, a third from Norwegian and EU pipeline imports, a fifth from LNG imports from global markets and seven per cent from gas storage.

Action is already being taken to further improve gas security of supply:

  • Ofgem are proposing to sharpen incentives on wholesale gas suppliers to secure their gas supply
  • There is now a better functioning market in Europe, making it easier to move gas to where supply is tight
  • We continue to support environmentally sound exploitation of conventional and unconventional gas sources within the UK and internationally

Independent analysis commissioned by DECC suggests that intervening further in the market in order to encourage more gas storage to be built would risk adding disproportionate costs to energy bills for households and industry, and would not be necessary when gas security can be provided more cheaply by the market.

Our analysis shows that extra interventions risk adding disproportionate costs to energy bills for households and industry, and distorting a well-functioning gas market. In the light of this the government has decided not to intervene further in the gas market in order to encourage more gas storage to be built.

The document above details the options the government considered and the outcome of this work. Further detail is also available in the Written Ministerial Statement.

In order to inform these considerations, DECC appointed Redpoint Energy to conduct an independent assessment of the impact of a set of potential interventions in the gas market on security of supply.

Published 3 September 2013