Centrica has announced it is shelving new-build gas storage projects at Baird in the North Sea and Caythorpe in East Yorkshire. The company will have to write off £240 million it has already sunk into the projects.

The British Gas owner blamed a recent government decision not to subsidise additional storage for its choice to scrap the £1.5 billion Baird project, saying it was no longer economically viable.

The facility off the Norfolk coast would have provided 13.5 days of gas storage for the UK, roughly doubling current capacity.

The smaller Caythorpe project has been put on hold indefinitely but may be resurrected subject to changes in the price of gas.

Mike Foster, CEO of Energy & Utilities Alliance and a former MP said: “The Government were warned in the summer this would happen. They were told by us that investment would be lost and with it the many hundreds of jobs building the storage and the hundred or so permanent jobs required in the future to operate it.”

He added: “We also know, from DECC official sources, that the Government did not make any formal assessment of the benefits the UK would get from private sector investment in gas storage. Intervening in the gas storage market would have been good for UK industry, UK workers and the UK consumer. It’s just a pity DECC is not on-side.”

A spokeswoman for DECC said: “The market is providing new storage facilities without subsidy. Two new gas storage facilities have recently been built and two further are under construction.

“Gas storage, while important, only provides a small proportion of UK total supply. Subsidising storage risks adding significant costs to consumer bills, with the costs of the subsidy outweighing any benefits to security of supply.”