SHARES in Centrica tumbled yesterday after the British Gas owner said it would write off £240m in investment after it abandoned plans to build two new gas storage projects in the UK.
The FTSE 100-listed energy company said that it had decided not to proceed with the facilities at Baird off the coast of Norfolk – which would have cost around £1.5bn - and a smaller project in Caythorpe in East Yorkshire due to “weak economies for storage projects” and blamed a decision by the UK government on 4 September not to subsidise new gas storage.
Shares fell over five per cent in early trading but recovered slightly by the end of the day, closing 1.3 per cent lower at 397p.
The government says that further subsidies are not needed and claims that not subsidising gas storage will save consumers £750m over a decade.
However, the gas industry argues that more storage is needed to protect Britain’s energy security. Regulator Ofgem has warned that homes and businesses could face regular blackouts in as little as 18 months.
With the UK increasingly reliant on imports, it has also been argued that less storage leaves consumers more vulnerable to price spikes.
The difference between seasonal gas prices has now narrowed to a point where storing gas is no longer financially attractive for companies.