My Lords, I was happy to add my name to the amendment. I see it more as a vehicle for promoting a short discussion, which I think we shall have, rather than something that ought to be added to the Bill; I think the noble Lord, Lord Oxburgh, has made that clear.
I have in the past debated in successive energy Bills the need for the United Kingdom to increase its storage capacity. We have far less than other countries. I have always been met with the argument, to which the noble Lord, Lord Oxburgh, referred, that we have so many different sources of supply that we do not need the same levels of storage as other countries. The mistake that we have been making, and I certainly plead guilty to this, is that we have seen it in terms of security of supply, whereas—as I think the noble Lord, Lord Oxburgh, makes clear and I would argue—we are really arguing about price, not supply.
If one looks at the UK gas market over the past two years, 2011-12 and 2012-13, it is pretty level for most of the season. The price rises slightly towards the autumn, and then in December, February and March there are sudden spikes and it goes up to sometimes two and a half times the normal rate. That is what happens to world gas markets during the winter: the demand substantially exceeds the supply and the result is that the price goes shooting up—not for long but it does—and the companies have no option but to pay it and immediately pass it on to the consumers in higher prices.
If you had a level of storage whereby you could build up the supplies during the summer and release them during the winter so that you are not dependent on the huge spikes in world gas prices, it would protect consumers. I see this whole question of storage as being much more about protecting the consumer market against sudden spikes in prices, rather than any shortage of supply. I do not see any risk of there being a shortage of supply but it is perfectly clear that we have had very substantial spikes in prices.
I took the advice of somebody who is very much involved in all this. I will quote what he said to me:
“If we had had sufficient gas storage last winter to maintain gas prices close to average winter prices (~70p/therm) rather than seeing prices spike to over £1.50/therm it would have saved costs to the UK economy of between £300-400 million. This is the sort of saving/protection that should be foremost in the Government’s mind”.
This is something that should not be ignored. I am not suggesting that there is any particular solution to this. If the market could be persuaded that this is a proper thing to do—I have heard of a project involving storage in a depleted offshore gas field; I think it is called Deborah—that could provide the vehicle for the kind of storage that we are talking about, which would save consumers the kind of price hikes that they have had to face in the past.
There is another interesting point. A very interesting study was published this morning—there may have been reference to it in the press—by a very well known academic, Nick Pidgeon at Cardiff University, who looked at public attitudes to all this. His synthesis report is called Transforming the UK Energy System: Public Values, Attitudes and Acceptability. It is a long report and I do not propose to read more than one sentence of the executive summary—well, two sentences—but it has relevance to the discussion we are having. The report says:
“While ‘energy security’ as a term was not salient to people, the range of concerns that it encompassed (geopolitical issues, energy shortages, black outs, unaffordable prices) did evoke strong reactions. Energy security is particularly closely linked in public perceptions to affordability because it relates to concerns about personally not being able to access energy services, while concern about national level insecurity in supplies of fossil fuels was seen as a symptom of the problems of fossil fuel dependency”.
In other words, security is not seen primarily as “We are going to run out” but as an issue of affordability. This is spelt out at some length in Nick Pidgeon’s report. It is the product of more than a year’s work by him and a team of academics, and it is something to which we should give some attention.
So, in addition to the general point that the question of storage relates to price rather than to capacity or the question of running out, so it is also associated in the public mind with affordability. That is why, if we can level out the prices by encouraging the industry to invest in more storage, we would find it valuable on both accounts: it would be valuable in terms of reducing cost but also in reconciling public opinion to some of the difficulties that we have faced in the past of sudden spikes in energy prices.