UK Energy Storage has signed an Agreement to Lease (“A2L”) with Portland Port Limited (“PPL”) covering two sites at the former Royal Navy port in Dorset, with the intention of developing a planned integrated Energy-Hub, centered around hydrogen-ready gas storage and a future green hydrogen generation capability, subject to new planning consent and securing necessary development finance.
According to the parties’ agreement, UKEn’s proposed Energy-Hub development concept aims to resurrect and expand on a previously unrealized project by Portland Gas Storage Ltd, which was granted planning permission by Dorset County Council in 2008 to locate approximately 43 billion ft3 “bcf” (1.2 billion m3 or “bcm”) of underground salt cavern storage beneath PPL’s land. The projected new Energy-Hub is expected to comprise the following essential aspects, based on established engineering principles, public record planning submissions, publicly accessible data, UKOG internal research, and technical, engineering, and economic modeling guidance from Xodus Group (“Xodus”):
- A hydrogen-ready Energy-Hub ideally positioned within a bustling harbor location;
- Construction of a hydrogen-ready salt cavern with a capacity of up to 43 billion cubic feet (1.2 billion cubic meters). For reference, if this capacity is eventually realized, it will significantly enhance the UK’s total operating subterranean gas storage capacity, which is now claimed to be 61 billion cubic feet (1.7 billion cubic meters). Because the facility is expected to be hydrogen-ready from the start, it will be able to store either hydrogen or natural gas.
- A new projected hydrogen-ready pipeline would connect salt cavern storage to the national pipeline transmission system (“NTS”). According to the previous 2008 estimate, the new pipeline will have a capacity of up to 1 billion cubic feet per day (28 million cubic meters per day). To put things in perspective, if this throughput capacity is realized, it will account for roughly one-seventh (14%) of current anticipated UK daily natural gas consumption.
- Green hydrogen generation and storage on a pilot scale, as well as hydrogen battery concept research. The Company and its consultant Xodus seek to create future possibilities for supplying renewable power for green hydrogen generation at the site via an over-the-horizon floating wind farm, which is a specialty of Xodus.
- The construction of a new LNG import plant in the port, will reduce cavern-fill cycle times and increase income. The Company’s goal is to obtain long-term LNG from the United States and other reliable sources.
- As the ‘hydrogen economy’ evolves, the development will be ‘future-proofed’ by engineering that allows for a seamless transition to green hydrogen generation and storage.
- A strong geothermal heat gradient in the surrounding area will be studied for a potential local heat network and/or to power green hydrogen production;
- The Company and PPL will also collaborate to look into the possibility of using future green hydrogen production at the port to directly fuel future hydrogen-powered ships. The feasibility of green hydrogen export by ship in the future will also be investigated.
UKOG’s Chief Executive, Stephen Sanderson, said: “It’s difficult to recall a period in recent history when energy security and the resilience of the UK energy system were so prominent in the public and governmental consciousness. UKOG is therefore delighted to announce its intention to develop an infrastructure project that could both materially strengthen the UK energy system’s resilience to supply and demand shocks, as well as lay the groundwork for a potentially significant and strategic element of the future green hydrogen economy, in line with the government’s new British Energy Security and Hydrogen Strategies and National Grid’s 2021 Future Energy Scenarios (“FES”).”
The A2L grants UKEn the exclusive right to proceed with the development and enter into a 30-year lease in exchange for annual ground rent, a future gas throughput tariff, and related LNG vessel berthing charges (namely: final property due diligence, planning, and regulatory permits, sufficient development finance and the site being free from significant contamination).
The A2L has agreed-upon lease and operating agreement forms, as well as a longstop date that, unless otherwise negotiated, allows UKEn to terminate the agreement if the criteria are not satisfied within four years of the effective date. The lease also gives UKEn the option to extend or terminate the lease at 5-year intervals. After the first lease term expires, UKEn has the option to renew the lease for another 30-year term on the same conditions. Up until the A2L longstop date, UKEn has paid roughly £0.9 million in total ground rent.
Following that, the Company aims to execute more thorough engineering and commercial studies, as well as prepare and submit a full planning application. The Company plans to update and use important components of the earlier permitted development in its planning proposal where appropriate and to decrease the planning consent cycle time.
The magnitude and nature of the Energy-Hub development is projected to qualify as a Nationally Significant Infrastructure Project, according to Zetland Ltd, the Company’s planning consultants (“NSIP”). This would need to submit a Development Consent Order (“DCO”) application directly to the Planning Inspectorate for approval. The Secretary of State for Levelling Up, Housing, and Communities would have the final say on whether or not to issue a DCO.
