UK ministers rule out subsidies to boost gas storage Ministers have ignored industry pleas to subsidise investment in new gas storage facilities, saying the UK's supplies are sufficient and that its decision will save bill payers up to £750m over 10 years. Independent analysis, commissioned by ministers, showed there was no case for the government to support new storage. It found the UK energy market continuing to function well in attracting gas from a range of sources to meet current and future demand. The government also argues that gas storage, while important, only provides a small proportion of Britain's total supply, and does so in combination with a range of alternative infrastructure such as pipeline or imports of liquefied natural gas. The decision, after a consultation, comes despite calls by industry for some form of incentivisation. The UK has about 4-5 per cent of annual demand in storage, compared with 17-18 per cent in many European countries. While this was not regarded as a concern during the heyday of North Sea production, industry and energy experts have warned that with output in decline and the country increasingly reliant on imports, a higher level is required. In March this year, during a prolonged cold snap, Britain came close to running out of gas in storage, sending prices higher. The government, however, on Wednesday insisted that the costs of intervention would far outweigh any benefit to security of supply. The potential cost of £750m was calculated on the basis of building one large storage reservoir. "We were right to examine the case for subsidy," Michael Fallon, energy minister, told the Financial Times. But we are now moving energy policy back to the market. We have a number of sources of gas, as well as new fast cycle facilities being developed which will increase our gas storage capacity. "The government is doing all it can to help consumers reduce energy bills and there is no benefit in further expensive subsidies when the market is working," Mr Fallon added. The decision will come as a blow to companies who had hoped the government would provide support, in particular for long-term storage sites which have seen profits drop in recent years. An unusually small difference between summer and winter gas prices is making it uneconomic to invest in these as they rely on gas being cheaper in the summer, when it is pumped into a field. It is then extracted and sold for a profit when demand drives prices higher in winter. Centrica, the utility, which owns the site at Rough, off the Yorkshire coast, has put on hold plans to convert the empty Baird field, off Norfolk, into another facility. Mr Fallon pointed out that industry was investing in new, shorter-term facilities, with two sites opened over the past two years and another two under construction. Once these facilities are complete, the capacity of UK storage facilities to meet peak demand will have doubled since 2000. He insisted the government was not "complacent about security of supply" and that it was "more important to avoid unnecessary costs." He brushed aside concerns that prices could spike again in the event of severe supply disruptions, noting that the UK had "sufficient sources of supply" and that the new storage sites would add to this. Ministers considered several options for intervention including: placing obligations on gas companies to secure supplies; holding more gas in storage during winter; and providing subsidy for new storage facilities. Centrica said in a statement it was disappointed by the announcement and "the government's decision not to introduce measures to promote more seasonal gas storage." It added it nevertheless welcomed clarity on policy and will consider the effect of the decision on the future of its storage projects.