Blue Ocean Strategy
for Manufacture of gas; distribution of gaseous fuels through mains (ISIC 3520)
The industry's high capital expenditure (MD06) and 'Declining Long-Term Demand' (MD01) for conventional gas necessitate a shift towards new value curves rather than incremental improvements. The existing vast pipeline infrastructure presents a significant asset that can be repurposed, offering a...
Eliminate · Reduce · Raise · Create
- Development of new natural gas pipeline infrastructure Avoids creation of stranded assets (MD01) in a decarbonizing economy, freeing capital for future-proof investments in low-carbon energy solutions.
- Marketing and lobbying for increased fossil gas consumption Redirects resources from a declining market (MD01) towards advocating for sustainable energy solutions, improving public perception (CS03) and social license.
- Long-term contractual lock-ins for fossil gas supply Reduces exposure to volatile fossil fuel prices (MD03) and enhances flexibility to transition to renewable gas sources, aligning with decarbonization goals.
- Capital expenditure on natural gas-specific asset maintenance Shifts investment focus from aging, declining assets to adaptation and new energy carrier infrastructure, optimizing resource allocation (MD01, IN02).
- Reliance on a single energy commodity (natural gas) Mitigates market obsolescence risk (MD01) and price volatility (MD03) by diversifying into multiple low-carbon gas vectors like hydrogen and biomethane.
- Operational complexity due to legacy system rigidity Streamlines processes by adopting modern, multi-gas compatible technologies and standards, improving efficiency and reducing the drag of technology adoption (IN02).
- Investment in R&D for hydrogen and biomethane technologies Addresses the 'High R&D Burden' (IN05) to accelerate innovation and secure future market leadership in new energy vectors, creating new value options (IN03).
- Feasibility and pilot projects for pipeline repurposing Proves the viability of converting existing infrastructure for low-carbon gases, leveraging high capital investment assets (MD06) for future use and mitigating MD01.
- Proactive engagement with regulatory bodies for policy support Crucial for navigating 'Policy Dependency' (IN04), ensuring a supportive environment for infrastructure transition and new market creation in emerging energy sectors.
- Competence in managing complex multi-directional energy flows Prepares the workforce and systems for handling diverse energy carriers (e.g., power-to-gas, CCUS), increasing operational sophistication and resilience.
- Carbon Capture, Utilization, and Storage (CCUS) infrastructure as a service Leverages existing network expertise (Key Insight) for new environmental services, generating new revenue streams and supporting industrial decarbonization for large emitters.
- Integrated green hydrogen production and distribution networks Establishes entirely new value chains for renewable energy storage and transport, serving new industrial and transport customer segments demanding decarbonized fuel.
- Biomethane grid injection points and certification services Unlocks market access for distributed renewable gas producers, diversifying supply and offering verifiable sustainable energy options to customers.
- 'Energy hub' services integrating gas, power, and heat networks Expands the value proposition beyond gas, leveraging network infrastructure for broader energy solutions and demand-side management, offering holistic energy services.
This ERRC grid aims to redefine the gas distribution industry from a fossil fuel provider to a multi-energy vector infrastructure operator and decarbonization enabler. It targets industrial emitters, renewable energy producers, and large commercial entities seeking to decarbonize their operations and integrate sustainable energy solutions. By leveraging existing assets for new services like hydrogen distribution, CCUS, and biomethane injection, the industry can unlock new revenue streams, mitigate market obsolescence, and attract customers focused on sustainable energy solutions, making traditional fossil gas competition irrelevant.
Strategic Overview
For the 'Manufacture of gas; distribution of gaseous fuels through mains' industry, a Blue Ocean Strategy is critical for long-term viability. The sector faces significant 'Declining Long-Term Demand & Stranded Assets' (MD01) as the global energy transition accelerates. Instead of competing in a shrinking or highly regulated natural gas market, this strategy advocates for creating new market spaces through value innovation. This involves leveraging existing infrastructure and core competencies to serve emerging energy vectors and services, thereby making traditional competition irrelevant in these new domains.
Key applications like converting natural gas pipelines for hydrogen transport, developing Carbon Capture, Utilization, and Storage (CCUS) infrastructure, and establishing 'power-to-gas' facilities represent significant opportunities to redefine the industry's value proposition. These initiatives address the 'Uncertainty of Future Gas Mix' (IN03) and offer pathways to mitigate risks associated with fossil fuel dependency. However, success hinges on overcoming 'High Capital Investment and Long-Term Risk' (IN05) and navigating 'Regulatory & Policy Uncertainty' (MD01, IN04) which are inherent in pioneering new energy solutions.
4 strategic insights for this industry
Repurposing Legacy Infrastructure for Future Energy
The extensive natural gas pipeline network, a high capital investment asset (MD06), can be strategically repurposed for transporting emerging low-carbon gases like hydrogen or biomethane. This transformation creates a new value proposition, moving away from declining fossil fuel demand and capitalizing on existing investments to address 'Declining Long-Term Demand & Stranded Assets' (MD01).
Leveraging Network Expertise for New Environmental Services
The industry's core competency in managing complex, geographically dispersed pipeline networks can be extended to new services such as Carbon Capture, Utilization, and Storage (CCUS). This represents a distinct 'blue ocean' market, utilizing existing operational knowledge to provide critical infrastructure for decarbonization, diversifying revenue streams beyond traditional gas distribution, and addressing 'Uncertainty of Future Gas Mix' (IN03).
Mitigating Future Demand Risks through Power-to-Gas
Establishing 'power-to-gas' facilities allows the industry to convert excess renewable electricity into hydrogen or synthetic methane. This not only offers a solution for grid balancing and renewable energy storage but also creates a new demand source for the gas distribution network, directly confronting the challenge of 'Declining Long-Term Demand' (MD01) by linking the gas grid to the expanding renewable electricity sector.
Navigating High R&D Burden and Policy Dependency
Pioneering new energy markets like hydrogen or CCUS requires substantial 'High Capital Investment and Long-Term Risk' (IN05) in R&D and infrastructure development. The success and speed of these blue ocean ventures are highly dependent on 'Policy & Regulatory Uncertainty' (IN04) and public funding, requiring proactive engagement with policymakers to shape favorable regulatory environments.
Prioritized actions for this industry
Initiate comprehensive technical and economic feasibility studies for hydrogen blending and 100% hydrogen conversion of specific network segments.
Understanding the technical requirements, costs, and regulatory pathways for hydrogen integration is crucial for making informed investment decisions and de-risking future network transformation. This addresses 'Uncertainty of Future Gas Mix' (IN03) and helps overcome 'High Cost & Complexity of Modernization' (IN02).
Form strategic alliances with carbon emitters, technology providers, and academic institutions to develop and deploy CCUS infrastructure solutions.
CCUS requires significant capital and specialized expertise across multiple value chain segments. Partnerships mitigate 'High Capital Investment and Long-Term Risk' (IN05) and foster shared innovation, accelerating entry into this new market. This also diversifies revenue streams away from traditional gas sales.
Pilot 'power-to-gas' projects at locations with high renewable energy curtailment potential, focusing on synthetic methane or green hydrogen production for grid injection and storage.
Pilot projects demonstrate viability, refine operational procedures, and provide tangible data for scalability. This directly addresses 'Peak Demand Management & Supply Security' (MD04) by integrating renewable energy into the gas grid, creating new demand, and attracting regulatory support for innovative energy storage solutions.
Proactively engage with government and regulatory bodies to advocate for policies and funding mechanisms that support the transition to new energy carriers and CCUS.
Given the 'Dependency on Public Funding & Subsidies' (IN04) and 'Regulatory & Policy Uncertainty' (MD01), shaping the regulatory landscape is paramount. Early engagement can secure enabling frameworks, investment incentives, and clear technical standards for emerging technologies.
From quick wins to long-term transformation
- Establish an internal 'Future Fuels' task force to identify specific network segments for pilot projects and conduct preliminary techno-economic assessments for hydrogen or biomethane blending.
- Initiate dialogues with major industrial emitters in the operational area to explore potential CCUS partnerships and storage site identification.
- Review and update internal safety protocols and engineering standards to account for new gas compositions (e.g., hydrogen blends).
- Launch small-scale pilot projects for hydrogen blending (e.g., 5-20%) into selected local distribution networks, closely monitoring performance and safety.
- Develop a detailed investment roadmap for CCUS infrastructure, including potential hub locations and capture project integration.
- Invest in employee reskilling and training programs to build capabilities in hydrogen technologies, CCUS, and renewable gas production.
- Implement large-scale network conversions for 100% hydrogen delivery in targeted regions, contingent on policy support and technological maturity.
- Develop and operate significant CCUS transport and storage infrastructure, establishing new revenue streams from emissions sequestration.
- Diversify into 'power-to-gas' facility ownership and operation, integrating gas infrastructure with renewable electricity generation.
- Underestimating the 'High Capital Expenditure & Maintenance' (MD06) and long payback periods associated with pioneering new infrastructure.
- Failing to secure robust 'Policy & Regulatory Uncertainty' (IN04) frameworks, leading to stalled projects and investment risk.
- Ignoring the 'Social License to Operate Erosion' (MD01) by not adequately engaging communities on new energy projects, leading to project delays (CS03).
- Over-reliance on unproven technologies without sufficient pilot testing and risk assessment.
Measuring strategic progress
| Metric | Description | Target Benchmark |
|---|---|---|
| Hydrogen Readiness Index (HRI) | Percentage of network assets assessed and certified for hydrogen blending or 100% hydrogen transport. | 5% network certified for 20% hydrogen blend by 2027; 1% for 100% hydrogen by 2030. |
| CCUS Project Pipeline Value | Total estimated investment in CCUS infrastructure projects under development or secured. | USD 500M in identified projects by 2028. |
| New Revenue Streams from Non-Traditional Services | Percentage of total revenue derived from hydrogen distribution, CCUS, power-to-gas, or other new energy services. | 5% of total revenue by 2030, 15% by 2035. |
| Regulatory & Policy Support Engagement Score | A quantitative measure of proactive engagement with policymakers (e.g., white papers submitted, task force participation, policy changes influenced). | Achieve 'leading' status in industry policy advocacy within 3 years. |
Other strategy analyses for Manufacture of gas; distribution of gaseous fuels through mains
Also see: Blue Ocean Strategy Framework