National Grid warns the UK's gas supplies are running low

Courtney Goldsmith
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Britain Freezes As Siberian Weather Sweeps Across The Country
The Beast from the East has ravaged the UK (Source: Getty)

As freezing weather continues to seize the UK today, National Grid has warned Britain does not have enough gas supplies to meet demand.

The UK's grid operator issued a gas deficit warning as a perfect storm of supply issues and rocketing demand hit the nation. The UK's gas supplies fell more than 50m cubic metres short of expected demand at one point.

By early afternoon, National Grid was forecasting daily demand of 403.5m cubic metres, more than 100m cubic metres above the average for this time of year.

Read more: This energy supplier is hiking its prices as gas costs rise on cold weather

"National gas demand today is high and due to the extreme weather conditions, there have been gas supply losses overnight," National Grid said in a tweet.

"This is an indication to the market that we'd like more gas to be made available to ensure the safe and reliable operation of the national gas network. We are in communication with industry partners and closely monitoring the situtation."

Roshan Patel, an analyst at Investec, said National Grid would take corrective measures for both the demand and supply side, including paying large industrial users to cut gas usage.

For consumers, he said there would be no immediate impact on tariffs, unless suppliers think the price spikes could become more frequent. Energy minister Claire Perry added that consumers should carry on with heating and cooking "as normal".

The impact on energy suppliers could be more severe, however. Smaller suppliers typically hedge gas purchases over the short-term, meaning they suffer the most from temporary spikes in wholesale prices.

"An extended period of high short-term gas prices and high demand can be a significant hit to profits, which may undercut the aggressive pricing of some smaller entrants," Patel said.

According to Tom Marzec-Manser, the head of the European gas team at commodity price agency ICIS, the warning was issued following an outage at the South Hook liquid natural gas (LNG) terminal in Wales, where all 60m cubic metres per day of capacity came offline in an unplanned outage. This piled on top of an ongoing outage in Norway and issues with a pipeline in the Netherlands yesterday.

Marzec-Manser yesterday said while it was highly unlikely the UK would run out of gas, Europe was playing "tug-of-war" over its available supplies as countries across the continent grappled with much lower temperatures than usual on top of supply outages.

The supply issues have caused within-day wholesale UK gas prices, which yesterday hit a 12-year high of around 190p per therm, to jump to around 350p per therm this afternoon.

Before the recent spike, the average within-day price in February was 56p per therm.

Tighter supply follows closure of gas storage site

Jonathan Marshall, energy analyst at the Energy and Climate Intelligence Unit (ECIU) said today's warning was grounded in the failure by successive governments to map out a secure gas future as they had successfully done for electricity.

Last year, Centrica closed the Rough gas storage site, which was the biggest in the UK.

"With limited storage, the UK is dependent on sufficient gas being in the LNG tanks and on being able to get more gas from Norway and Continental Europe, but there are physical limits on the pipelines that carry that gas," said Michael Bradshaw, a professor of global energy at Warwick Business School.

Marshall added that the UK is overly reliant on gas in the power and heating sectors. Nearly half of Britain's electricity is produced by gas while 84 per cent of homes are heated with it.

“Experts have long warned about putting too many eggs in the same basket, with events such as today the undesirable outcome," he said.

However, a spokesperson for the Department for Business, Energy and Industrial Strategy said a gas deficit was "not triggered because the country is short of gas, but is one of the short-term measures that the National Grid can take to make sure supply meets demand".

Read more: UK wholesale gas price hits a 12-year high as the Beast from the East rages

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