Rough, in the North Sea, represents half of Britain’s gas storage capacity - Centrica

Britain’s largest gas storage site risks closure by the end of the year unless the Government steps in to provide financial support.

Centrica, which owns the Rough storage facility, has warned of the potential shutdown this winter as it battles steep losses at the site.

Rough represents half of Britain’s gas storage capacity and its closure would be a significant blow to the resilience of the country’s energy system. The UK remains reliant on gas to help back up intermittent wind and solar, particularly over winter.

Chris O’Shea, the chief executive of Centrica, which owns British Gas, warned the storage site was expected to lose £100m this year and said: “We can’t sustain that.”

He told The Telegraph. “I would be willing to close it. My job is clear. It is to grow the company, grow jobs, grow profits, and I take that seriously.

“We’ve made money over the past couple of years. But we’re now pouring £100m into this asset that we could invest in other things.”

Centrica aims to redevelop the 40-year-old site to be able to store hydrogen alongside natural gas. However, Mr O’Shea said: “The market at the moment is not giving the right signals to invest in storage.”

The company has asked ministers for a so-called cap-and-floor mechanism to help fund the £2bn project. While Centrica would provide the investment up front, the mechanism would effectively mean guaranteed funding underwritten by a levy on consumer bills.

“I want a mechanism that encourages investment in Rough,” Mr O’Shea said. “We have seen it in nuclear, but let’s extend that to other assets that are needed to bring energy resilience.”Centrica boss Chris O’Shea says he is battling steep losses at the gas storage site - Geoff Pugh

Mr O’Shea said he had been encouraged by recent talks with the Government. He praised Rachel Reeves and Ed Miliband for highlighting the importance of gas storage as part of the Government’s industrial strategy.

However, the call for state support comes at a delicate time for Labour. Ms Reeves’s Budget has been left in tatters by a series of policy about-turns and poor economic data, forcing her to find billions rather than consider further spending.

Meanwhile, Mr Miliband is under pressure to demonstrate progress towards meeting his promise of lowering energy bills by £300 this parliament. It suggests the Energy Secretary may be wary of signing off on a measure that add more levies on to bills.

Mr O’Shea warned the issue of support for Rough was urgent and could not be put off. He said: “I think we’ve got to see something [from the Government] probably this year. If we get towards the end of the year and we’ve got a situation whereby we’ve got no prospect of making a profit, then we’re just throwing good money after bad.

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“It would be like a charitable donation and that’s not our business. If we were to do that, then the shareholders would act quite quickly.”

‘No one likes a freeloader’

Centrica has already stopped filling the facility off the Yorkshire coast amid concerns about the site’s financial viability.

Mr O’Shea said Government intervention was key to safeguarding Britain’s energy security. He said: “If Rough closes, then the UK has just six days of gas storage available, compared to 100 in France, Netherlands and Germany.

“If we get into a crisis and the UK hasn’t invested in gas storage, then I am not sure it will flow from the Continent.

“Politically, if you’re the prime minister of France, Germany, and you look at a country that hasn’t invested in gas storage, then I am not sure that will work. There is a need for us to recognise the risk that no one likes a freeloader.”

The potential closure of Rough risks reviving concerns over Britain’s strained energy supplies, particularly as the country moves to a system more reliant on intermittent renewables.

Gas power stations remain crucial for backstopping Britain’s energy system when wind and solar generation fall short, something that happens during so-called “dunkelflaute” periods of low wind and limited light that occur over winter.

“We have had pretty warm winters in the past couple of years, and that has helped us,” said Mr O’Shea. “If we’d had cold winters, then we would have struggled. Would you feel comfortable driving in the red zone in the revs all the time? I don’t feel comfortable with an energy system that has such a small margin for error.”

The closure of Rough would lead to the potential loss of hundreds of jobs at the site.

A Government spokesman said: “The future of Rough storage is a commercial decision for Centrica, but we remain open to discussing proposals on all gas storage sites, as long as it provides value for money for taxpayers.”