Tuesday 24 September 2013

Centrica denied subsidy - a small victory

No doubt Mr Drew will update this later, but initial reaction this morning to the news that Centrica won't be building offshore or onshore gas storage is that I am surprised and pleased.

Clearly, without subsidy this project could not go ahead and so Centrica have shelved it. Also, given market dynamics there was no demand for this project without a huge government subsidy. This is as it should be, no market need, no pay taxpayers moollah.

 Moreover, only in April Centrica announced a deal with Cheniere energy to supply shale gas to the UK. So we have a nice diversified supply set, Norway, North Sea, Qatar and the US, with the interconnector as a last resort for Russian gas. This is why the UK does not need 3 months storage like say Germany, which is hugely dependent on the whim of Moscow for its gas supplies.

The only slightly worrying part of this story is that the Lib Dems are in charge of DECC, this means that this subsidy was more likely denied because the Lib Dems hate the idea of a dash-for-gas which puts such a commonsense and commercial hole in their preferred dash-for insanity (otherwise known as windfarms) policy. Sadly the windfarm subsidies far, far outweigh anything Centrica is asking for gas.

So its a small victory for the market and Government policy today, but a small victory in a losing war for taxpayers.


Nick Drew said...

Yup, I am very pleased about this (credit to Fallon)

if only all the other attempts at special pleading were met with the same robust two fingers

I once had extensive dealings with the old ICI-as-was, their motto was: why do a hard day's work when you can go lobbying instead?

so much more enjoyable

rwendland said...

Off-topic, but related to subsidy-seeking, little reported in MSM is that Rosatom (Russian state nuclear energy corp) and the UK govt have signed a signed a MoU on co-operation in civil nuclear energy. Rosatom has teamed up with Finnish utility Fortum and Rolls-Royce to explore opportunities for the construction and operation of Russian VVER (PWR) nuclear power plants (not Chernobyl design) in the west and elsewhere.

So one day we might get Russian reactors in the UK, and give them generous CfD subsidies as well as to French EDF! To be fair, I think Russia is eyeing up smaller countries first, but wants UK regulatory approval as that would be accepted in most of the world.

News in the nuclear press and AFAICS only the FT in the MSM.

rwendland said...

... the FT also says EDF can't finance Hinkley Point C on its own, and is looking for a Chinese partner. But Chinese will only invest if they get some operational control, which UK govt does not like! This one could run for some time - but if the govt wants nuclear, they'd better learn to love China and Russia!!

Anonymous said...

Tarts like the ConLibs love anyone if the money is right.

CityUnslicker said...

RWEnedland, I have a firm belief no nuclear is going to be built if the only option is to ask our mortal enemies from over the channel to do it!

rwendland said...

CU, I omitted to mention that Hitachi is planning to build ABWRs in the UK, and probably have the finance for this (though the decline of the Yen might make that tougher).

So we also have the Japanese option (not a mortal enemy?). Though they plan to build an updated Fukushima design in the UK, which is food for thought!

James Higham said...

Not wishing to be harsh or anything but is there any point to the LibDems?