CENTRICA ENERGY STORAGE: Unlocking Economic Opportunity Stored in Energy Transition

In October 22, Centrica announced that it would reopen the Rough gas storage facility following a period of engineering work and upgrades to existing infrastructure. Closed for storage in 2017 and converted for gas production, Rough was said to be uneconomical, requiring significant investment to extend its useful life. But following significant investment, and the emergence of an energy crisis and pricing disaster, Rough returns as the largest UK gas storage facility, bolstering the UK’s capacity by over 50%.                                                                                                                

Currently, the facility is operating at 20% of its capacity, storing around 30 billion bcf of gas for use by UK homes and businesses. 19 miles off the coast of East Yorkshire, in the UK North Sea, Rough’s current mission is to provide stabilisation and security as energy markets reel from the Russia-Ukraine conflict.

Importantly, Centrica is looking at the long-term. It’s subsidiary Centrica Energy Storage has bold plans for Rough to become a hydrogen storage site and clean energy hub – the largest long-duration energy storage facility in Europe – as it works towards a net zero goal.

Martin Scargill, Managing Director at CSL, tells Energy Focus more about the challenges and opportunities that are quickly materialising – especially in the UK’s north east – as projects including the reopening of Rough are ramping up to solve the energy crisis and deliver on net zero.

“Centrica’s People and Planet Plan looks to achieve a net zero operation by 2045 and help our customers to get to net zero by 2050,” he says. “We are looking at hydrogen predominantly, in the Humber initially, and then broadening out what we’ve been doing in the energy transition space to other hubs in the UK, potentially exporting what we do further afield. 

“We will be net zero by 2045 at the latest and we are supporting, promoting and delivering energy transition projects right now. We are the biggest energy retailer in the UK and we want to help everyone get to net zero as quickly as possible while aligning with our customers and our purpose of helping everyone to live simply, sustainably, and affordably – that is what we’re all about.” 

REVITALISED ROUGH

In the short-term, reopening Rough will allow the UK to increase its gas storage levels dramatically. Previously, the country was storing around six days of gas compared to 103 days in France and 123 in the Netherlands. Storing cheap gas for use during peak demand (especially in the winter) is an essential part of tackling the energy crisis. Now, Rough holds enough gas for around 100 days of heating for one million average UK homes.

Long-duration energy storage (LDES) has been highlighted by a number of sources as key in the longer-term transition, and Rough will play a role in this space. The desire to decarbonise the energy system has been put in place with a 2035 goal, and the National Grid Future Energy System Scenarios report suggests that a range of hydrogen storage solutions could offer between 12 and 56TWhs by 2050 – Rough could provide at least 10TWhs of this.

The Department for Business, Energy and Industrial Strategy report on the benefits of LDES from July 2022 concluded: “Longer duration storage solutions reduce net zero system costs by between £13bn and £24bn”, and “the largest savings arise when flexibility is delivered through a combination of hydrogen storage and hydrogen CCGTs”.

Eventually, when the market is stable and the industry is comfortable, progressing Rough towards hydrogen storage will begin. The process and technology, while complicated, is proven. There are different methods including injecting hydrogen into salt caverns, pushing into porous rock in depleted oil and gas fields, mixing with a liquid carrier such as ammonia and storing deep in a lined rock cavern, or injecting directly into a lined rock cavern in the form of gaseous or liquid hydrogen. Innovative engineering is required, and Centrica can deliver. The crucial element is developing a market, creating a financially viable system, and connecting important players.

Scargill is buoyant about the opportunities and the potential for hydrogen rollout in the UK, and he is keen to see this start onshore, close to Rough, in Yorkshire and the Humber region – the UK’s largest cluster by industrial emissions.

“The potential is massive,” he highlights. “We have taken energy security for granted in the UK for too long. Things have worked in a time while there has been relative geopolitical stability. We have been able to freely import and export, and everyone was friendly. The UK has benefited from that in running a Just-In-Time energy system. Bills have been cheaper because less infrastructure has gone on to the consumer bill. In times where things are less friendly and the supply of gas is less available, and you have to pay a premium as you are competing, that’s when things like Rough storage become so important. It has been a jewel in the crown of the UK’s energy industry, balancing the grid for 30 years. Shutting it down was a decision that was not taken lightly, and we need to learn the lessons from this crisis and start thinking 50 years ahead, not 50 weeks ahead.”

In the past two years, policy makers have been forced into thinking about more of a Just-In-Case system, not only because of the Russia-Ukraine situation, but also because of the importing nature of the UK’s structure, contending in an open market with other nations and dealing with the increased variability of a supply and demand as we move to a more renewables-based system.

For Scargill, returning the UK to energy exporter status would have major macroeconomic benefits and that is why reopening Rough, and planning for a hydrogen future are essential.

“We have huge competitive advantages in the UK in terms of our offshore industry and our geography, with ability to store green electricity as hydrogen and rollout carbon capture, utilisation and storage (CCUS). Other countries don’t have this,” he states. “We should be thinking seriously about becoming an energy exporter and using assets like Rough which nature has given us in the UK. When the sun is shining and the wind is blowing hard on a holiday weekend in August, instead of wasting that precious renewable energy, we can  store it as hydrogen when it is being produced at its absolute cheapest, we should be putting it away somewhere and exporting it around the world. We have the vision, we need to turn ambition into reality and get on with these projects with a view to become energy-independent and energy-exporting, changing the fuel type from natural gas to hydrogen.” 

In the recent Skidmore review, Scargill was delighted that the importance of re-opening Rough got a mention on page 68, and that the longer term conversion to hydrogen was also called out on page 107, specifically highlighting as a key recommendation: “Deliver transport and storage business models as soon as feasibly possible and take a pragmatic approach to support key ‘no regrets’ transport and storage projects. 

Scargill says Rough is one such project and the UK cannot take the risk of getting left behind given the recent Inflation Reduction Act (IRA) in the US, and the EU’s fit for 55 programme. “Investment in hydrogen will go to the country most committed to it,” he says.  

HYDROGEN FUTURE? 

In 2021, the United Nations Economic Commission for Europe (UNECE) published a paper confirming results of modern research highlighting hydrogen as a replacement for fossil fuels (in some cases) as the EU looks to achieve the goals set out in the 2015 Paris Agreement. 

Today, most hydrogen is produced from fossil fuels and generation levels would need to shift significantly. With most major economies researching hydrogen production capability in some form, the potential to use the element for decarbonising becomes clearer. In the UK, Centrica is taking an optimistic stance.

“Hydrogen is a nascent market – there is no demand,” says Scargill. “How do you get businesses to invest switching their fuel to hydrogen? Currently, there is only hydrogen production in refineries and there is limited ambition to deploy hydrogen as people worry about how much it costs. It has to become cost competitive with other fuels.”  

In November 22, Centrica penned an agreement with Equinor to explore large scale, low-carbon hydrogen production at the Easington Gas Terminal – the connection site for Rough and right in the middle of the UK biggest industrial cluster. The area has the ability to receive up to one third of the country’s total gas supply with much coming from Norway and Equinor. The site is also close to a number of the world’s largest offshore wind farms which have the potential to generate large amounts of green hydrogen. Eventually, the vision is to produce up over 1GW of low-carbon hydrogen at Easington, a mix of blue and green.

“There are a number of challenges, but we look at it as an opportunity,” smiles Scargill. “We want to move fast and there is a lot of positive talk about the energy transition but not a lot of projects getting off the ground yet. One of the challenges is how to break the dependency on fossil fuels because they are very efficient. Anything you compare fossil fuels to – hydrogen or anything else – there is a cost. The cost of burning and discharging carbon into the atmosphere is not fully priced into the supply of energy. That is the biggest challenge as you have to get people to want to commit to spending money on moving to a net zero future – particularly during an energy crisis, this is really tough. Some people have retrenched and moved back into fossil fuels as they think about energy security and sovereignty at this point in time. The biggest challenge we see are the barriers to wide scale uptake and desire to move to cleaner energy,” he says, adding that this responsibility must be shared with the wider industry as well as government as a driver of change.

Most scientists and researchers have suggested that the future of hydrogen as an energy source is limitless. “It is only limited by political ambition,” states Scargill.

Within Centrica, and across the UK energy space, there is deep knowledge and experience – itself a proven exportable product. And despite negative sentiment around the oil and gas industry because of its association with carbon intensive nature, the skills in the industry are where solutions will come from, says Scargill – a Centrica and energy industry veteran of more than three decades.

“There are transferable skills, there are companies doing great things, and we have the supply chain to deliver a world leading hydrogen economy of the size that is only limited by ambition,” he beams. “We need to be leading in hydrogen as a country, and we need to become cost competitive through scale. Decarbonising the country’s industrial heartlands starting with a cluster strategy works, but that shouldn’t be the limit of hydrogen’s reach. We have had many high-profile politicians visit our assets – opposition leader, Sir Kier Starmer just a year ago – and our message there was think big on hydrogen. Look at oil and gas – go anywhere around the world and you will find Aberdeen or Newcastle grown skills on every single project. We want to ensure we become an exporter of skills, knowledge, technology, and everything that goes along with it when it comes to hydrogen. The opportunity is huge.” 

DEVELOPMENT ROADMAP   

Centrica Energy Storage (CES) is responsible for the Rough offshore storage facility comprising of five offshore platforms. The Easington Terminal is also part of the CES portfolio, receiving gas from Rough, York and Tolmount fields in the UK North Sea. Other net zero focus areas include zero carbon electricity generation through a stake in the UK’s existing nuclear fleet; 15GW of low carbon generation under management; de-carbonising commercial and industrial clusters (Centrica’s Business Solutions team) with solar, battery and small-scale hydrogen generation for combined heat and power units (CHPs); conversion of residential homes to hydrogen through our participation in hydrogen village trials. Centrica’s family of businesses are working across all value chains to decarbonise its customers.

Always guided by its vision and purpose of helping customers to achieve a net zero future, the group and company will continue to explore exciting opportunities that have the potential to bring change.

“We are looking at taking more positions in low carbon hydrogen and zero carbon electricity generation. We are not wind asset owners but we have a huge trading operation with over 15 GW of low carbon electricity under management and growing. We are a big player and everything we do is designed to help our customers get to a net zero future,” details Scargill.

“We have a lot of projects in the pipeline,” he continues. “Everywhere you look there are opportunities in the energy transition, right from big infrastructure stuff to support the Humber and other industrial clusters in decarbonising, things like gigawatt hydrogen production, hydrogen storage and export to Europe, right through to transportation, trading, commercial and domestic usage. We have a huge array of projects and if we can make a success of them then we could have the ambition to move them overseas as well.”

Already strong in Ireland, and with solid partnerships in Europe, Centrica forms part of a wider industry that is pushing boundaries.

“We are very integrated as a family of businesses and we see Centrica as a number of different business units that work individually, but when you bring them together you have real power to make a difference,” highlights Scargill. “We don’t advocate just hydrogen or just electrification – we think there will be a requirement for a blend. We think we need to electrify as much as possible but in hydrogen we will have to fill the gap that is left in the hard to abate sectors such as energy intensive industry, joining the dots between electrification, weather patterns, storage, transportation, smoothing out intermittency with renewables, and more.”   

But even with the power of big business in play, there are always hurdles to overcome. For CES and its net zero vision, the challenges are macro and require investment, vision, and action. In a UK economy battling through recession and coming out of an unprecedented period after the pandemic, against a backdrop of war involving a major energy nation, generating the required will is the difficulty. 

“In the UK, the intent is good and world leading in terms of the targets. However, the projects are not getting off the ground and investors are not seeing bankable opportunity. There is a real risk of being left behind as others around the world race to de-carbonise,” says Scargill.

“Do we have the supply chain strength, do we have the skills, do we have everything else we need to deliver projects?” he questions. “The spend on energy infrastructure projects in the UK sits at around £10 billion on average, and it needs to ramp up to £50 billion a year and stay there for 20 years so that we can achieve net zero by 2050. How do you ramp up an economy to deliver that when you have just gone through a pandemic and are in recession and an energy crisis – it is a big challenge.” 

More can be done in the acceleration of an energy transition, according to a recent report on the Humber region specifically. The net zero review from former Energy Minister, Chris Skidmore found that businesses and industry are open to change and ready to embrace new technology and processes, with steps available right now. Onshore wind and solar installations, using infrastructure alongside financial incentives and tax benefits, as well as a plethora of other support schemes must be adopted quickly so that the area can become an exemplar in the energy transition. 

“We are starting to invest. We think it’s just a matter of time,” says Scargill.

“To meet our customer’s needs, we need clean energy; reliable, affordable, and secure energy sources. In getting there, there is benefit for the economy – jobs, growth, skills etc. The socio-economic benefits for delivering the energy transition does need to be highlighted, particularly when looking at the industrial heartlands of the north east and north west, and other areas that have suffered from under investment in infrastructure.

“We are working with the Confederation of British Industry (CBI), UK Research and Innovation (UKRI) and many partners to understand what impact decarbonising the entire Humber region would have,” he adds. “We think that with our projects alone we could generate 2,000 jobs during construction and then hundreds of highly skilled jobs and well paid in the decades to come, just for our projects. If you scale that across the Humber – as the UKs biggest energy estuary and biggest single polluting industrial hub in the UK – there is a major opportunity for future greening and future investment.”

Currently, the UK is pursuing a strategy to reach net zero emissions by 2050 and reduce reliance on imported fossil fuels while promoting a sustainable economy with new green investment and jobs. 

FUTURE POWER

Specifically in the east and north east of the UK, CES is busy with multiple projects – including reopening Rough and researching hydrogen production at Easington – and the company is continuing to invest to support its local community. From here, as the transition gathers pace, there will be a base of expertise that can power decisions in regions searching for decarbonisation around the world. 

“We have a very deep knowledge base in our operational, technical and engineering teams. We also have strong reach into a supply chain for skills and certain activities. At CES, we run a model that works in partnership with our supply chain partners, and we invest in skills around STEM to ensure the strength in our team. Our operations support thousands more jobs and billions of dollars of investment,” says Scargill. 

The Managing Director believes that if you build it, they will come, and he is certain that investment in the Humber region will have a circular benefit. 

“Whether that is CCUS, hydrogen generation, or similar, businesses move to areas where critical infrastructure is deployed and there is a reliable supply of clean energy. There is massive societal benefit during the transitional phase as new companies are grown, and existing industries are bolstered and kept in the UK rather than being moved offshore (green steel is a good example),” he adds. 

Clearly, those active in the industry are sure. Those operating in the region are certain. And those demanding a cleaner and greener future continue to offer their support. Now is the time for the transition to be utilised for economic gain and not only environmental responsibility. Whether hydrogen rollout, ongoing electrification, balancing an unstable supply environment, or ensuring security and affordability of supply, Centrica and CES are contributing in a big way. 

“We are looking at what we’re doing here in the Humber as an energy transition hub and seeing if we can replicate that in other places, like Ireland. We have a number of cross-business-unit collaboration opportunities on hydrogen, electrification, and on other energy fronts,” underlines Scargill. 

“We are now in 2023 and we are supposed to have 10GW of low carbon hydrogen production on the system by 2030 – just seven years to deliver,” he concludes, highlighting the need for progress in the short term while Centrica and the rest of the industry builds sustainability in the longer term.