Market Sizing (TAM/SAM/SOM)
for Manufacture of gas; distribution of gaseous fuels through mains (ISIC 3520)
Given the industry's extremely long asset lifecycles (ER03, PM03), significant capital expenditure, and the existential threat posed by decarbonization (MD01, ER01), accurately sizing future markets for traditional and new gaseous fuels is absolutely critical. Incorrect market sizing could lead to...
Market Sizing (TAM/SAM/SOM) applied to this industry
The 'Manufacture of gas; distribution of gaseous fuels through mains' industry faces a critical market bifurcation: a rapid contraction of its traditional natural gas Serviceable Addressable Market (SAM) due to high obsolescence risk, juxtaposed with a nascent but policy-driven Serviceable Obtainable Market (SOM) in renewable gases. Strategic success hinges on accurately sizing these diverging paths to manage decline while aggressively capturing new, fragmented growth opportunities.
Model Rapid Traditional Gas SAM Contraction Urgently
TAM/SAM/SOM reveals how accelerating policy-driven electrification and energy efficiency improvements (MD01) will shrink the SAM for traditional natural gas, transforming it from a growth market into one requiring managed decline, particularly in mature residential and commercial sectors. The high market saturation (MD08) implies limited elasticity to price adjustments, exacerbating demand erosion and increasing asset stranding risk for existing fixed networks (MD06).
Develop granular regional SAM forecasts by end-use segment to identify specific asset stranding risks for current infrastructure and proactively plan strategic divestments or repurposing programs.
Calculate Regional Renewable Gas SOM Integration Potential
The SOM for biomethane and hydrogen is currently constrained by production capacity and infrastructure readiness, but TAM/SAM/SOM analysis pinpoints geographical clusters with high renewable feedstock availability (for biomethane) or renewable electricity surplus (for green hydrogen) that can efficiently feed into existing distribution networks (MD06). This allows for precise sizing of initial market entry points and future expansion corridors.
Prioritize infrastructure upgrades and interconnection projects in identified high-potential regions to capture early-mover advantage in renewable gas distribution and diversify the asset base.
Identify High-Value Industrial Decarbonization SOM Segments
TAM/SAM/SOM frameworks effectively differentiate industrial 'hard-to-abate' sectors from broader industrial demand, revealing a premium SOM for low-carbon gases where electrification is technically or economically unfeasible. This segment's TAM is dictated by specific industrial process requirements and regional regulatory incentives, with the extensive fixed network (MD06) being a critical delivery asset.
Establish dedicated sales and engineering teams to engage industrial customers in identified high-value sectors, offering bespoke low-carbon gas supply solutions and advocating for targeted policy support to unlock this premium SOM.
Quantify Electrification's Network Asset Stranding Risk
TAM/SAM/SOM analysis reveals the specific scale of asset stranding risk for the extensive fixed gas distribution network (MD06) as residential and commercial SAM shifts towards electrification (MD01). Quantifying the declining volume through existing pipes allows for a precise calculation of underutilized capacity and potential decommissioning costs versus repurposing opportunities for renewable gases.
Conduct detailed regional cost-benefit analyses for gas network repurposing (e.g., hydrogen blend, pure hydrogen) versus decommissioning, leveraging insights from the quantified network underutilization to inform investment decisions.
Model Policy's Direct Impact on Market Boundaries
Market sizing frameworks must explicitly incorporate detailed regulatory scenarios to accurately define the evolving TAM, SAM, and SOM for both traditional and new gaseous fuels. Policies such as carbon pricing, blending mandates, or direct subsidies for renewable gas production (MD01, MD08) are not just external factors but directly expand or contract addressable markets and define achievable penetration.
Develop a sophisticated regulatory affairs function to actively lobby for favorable policy frameworks (e.g., renewable gas mandates, infrastructure investment incentives) that expand the addressable and serviceable markets for low-carbon gases.
Strategic Overview
For the 'Manufacture of gas; distribution of gaseous fuels through mains' industry, Market Sizing (TAM/SAM/SOM) is not merely an academic exercise but a critical strategic imperative, particularly in the face of the global energy transition. Traditional natural gas demand is under pressure due to decarbonization targets and electrification trends (MD01, MD08), necessitating a re-evaluation of current market footprints. Simultaneously, emerging gaseous fuels like biomethane and hydrogen represent new, albeit nascent, market opportunities.
This framework allows firms to accurately quantify the declining TAM for conventional gas and, more importantly, to define and estimate the SAM and SOM for these new, low-carbon gaseous fuels. This analysis is crucial for guiding multi-billion-dollar infrastructure investment decisions (ER03) and avoiding stranded assets (MD01). By understanding the evolving market landscape, companies can align their long-term strategies, portfolio adjustments, and engagement with policymakers to secure their future relevance and profitability in a rapidly changing energy ecosystem.
5 strategic insights for this industry
Declining SAM for Traditional Natural Gas
In many developed economies, the Serviceable Addressable Market (SAM) for traditional natural gas in heating and power generation is projected to decline significantly over the long term due to electrification policies, energy efficiency improvements, and the shift towards renewable energy sources (MD01, MD08). This requires gas distributors to plan for network optimization, repurposing, or divestment.
Emergence of Renewable Gases as a New SOM
The Serviceable Obtainable Market (SOM) for gas distributors is increasingly defined by their ability to integrate and distribute biomethane and hydrogen. The TAM for 'gaseous fuels' is expanding beyond fossil natural gas, but the SOM for individual firms depends on their infrastructure compatibility, supply chain development, and regulatory support (MD01, MD06).
Policy and Regulatory Frameworks Dictate Market Shifts
The future size and composition of the TAM/SAM/SOM for gaseous fuels are heavily influenced by government policies, mandates (e.g., hydrogen blending targets, carbon pricing), and incentives. These policies can rapidly create new markets or accelerate the decline of existing ones, making regulatory foresight critical (MD01, MD03).
Industrial Decarbonization as a High-Value Market Segment
While residential and commercial heating may electrify, industrial 'hard-to-abate' sectors (e.g., steel, chemicals, cement) represent a substantial and high-value SAM for low-carbon gaseous fuels like hydrogen. Sizing this specific industrial demand is crucial for strategic focus and infrastructure planning (MD01).
Geographic Variations in Market Potential
The TAM/SAM/SOM for different gaseous fuels will vary significantly by region due to local resource availability (e.g., biomethane feedstocks, renewable electricity for green hydrogen), existing industrial clusters, and specific national/regional energy policies (MD02). A granular, regional market sizing approach is therefore essential.
Prioritized actions for this industry
Develop Multi-Scenario Market Forecasts for Traditional and Low-Carbon Gases
Create robust TAM/SAM/SOM projections under various decarbonization pathways (e.g., aggressive electrification, high hydrogen adoption) to understand potential future revenue streams and risks, informing flexible investment strategies.
Quantify Biomethane and Hydrogen Integration Potential on a Regional Basis
Conduct detailed studies to identify viable biomethane production sites and industrial hydrogen demand clusters within the service area, estimating the SAM/SOM for these new fuels based on existing and adaptable infrastructure.
Segment and Size Industrial 'Hard-to-Abate' Demand for Hydrogen/Low-Carbon Gas
Focus strategic efforts on high-value industrial customers that are unlikely to electrify fully, sizing their potential demand for low-carbon gaseous fuels to inform targeted infrastructure development and commercial strategies.
Assess Impact of Electrification on Residential/Commercial Demand and Network Utilization
Model the decline in traditional gas demand in these sectors to understand the future utilization rates of the existing network, informing decisions on network optimization, decommissioning, or repurposing.
Proactively Engage with Policymakers to Shape Supportive Market Frameworks
Advocate for policies (e.g., hydrogen subsidies, carbon pricing, network transition plans) that support the development of a viable market for low-carbon gaseous fuels and ensure fair cost recovery for necessary infrastructure investments.
From quick wins to long-term transformation
- Conduct a baseline analysis of current gas consumption by sector (residential, commercial, industrial) within the existing service area.
- Gather existing governmental and industry reports on future energy demand and decarbonization pathways to inform initial market scenarios.
- Begin tracking competitor activities and announcements related to renewable gas investments and market entry.
- Develop internal capabilities for econometric modeling and scenario planning for future energy demand.
- Pilot projects for biomethane injection into the grid to understand technical and commercial feasibility and gather real-world data.
- Commission external market studies for specific low-carbon gas opportunities (e.g., hydrogen valleys, industrial clusters).
- Establish cross-functional teams to integrate market sizing insights into network planning and investment decisions.
- Full integration of market sizing and demand forecasting into capital allocation and asset management systems.
- Develop long-term partnerships with renewable gas producers and industrial off-takers.
- Execute large-scale network conversions or new infrastructure builds for hydrogen or carbon capture.
- Continuous feedback loop between market analysis, policy advocacy, and strategic execution.
- Over-reliance on historical growth trends without adjusting for disruptive energy transition forces.
- Underestimating the speed or impact of electrification in residential and commercial sectors.
- Failing to account for the competitive landscape, including direct electrification and other energy vectors.
- Lack of granular data for regional market potential, leading to inaccurate SAM/SOM estimates.
- Ignoring the critical role of policy and regulatory uncertainty in shaping future market conditions.
- Overly optimistic projections for hydrogen or biomethane adoption without solid supply and demand fundamentals.
Measuring strategic progress
| Metric | Description | Target Benchmark |
|---|---|---|
| Projected TAM/SAM/SOM for Natural Gas (by Volume and Revenue) | Quantifies the total potential, serviceable, and obtainable markets for traditional natural gas in specific geographic areas and timeframes. | Regularly updated with a clear downward trend in traditional gas volumes in mature markets. |
| Projected TAM/SAM/SOM for Renewable Gas (Biomethane, Hydrogen) | Quantifies the potential market size for low-carbon gaseous fuels, tracking expected growth in volume and revenue over time. | Achieve year-on-year growth in projected renewable gas SAM/SOM aligned with decarbonization targets. |
| Investment Allocation by Fuel Type | Percentage of total capital expenditure allocated to natural gas infrastructure versus biomethane/hydrogen infrastructure. | Progressive shift towards renewable gas investments, e.g., >20% by 2030. |
| Market Share of Renewable Gas in Total Gas Mix | The percentage of total gas distributed that originates from renewable sources (biomethane, green hydrogen). | Achieve 5-10% renewable gas in the mix by 2030, increasing thereafter. |
| Customer Retention/Churn Rate for Traditional Gas Customers | Measures the rate at which existing natural gas customers switch to alternative energy sources or reduce consumption significantly. | Maintain churn rate below 1-2% annually in core segments, or target specific segments for strategic 'de-risking'. |
Other strategy analyses for Manufacture of gas; distribution of gaseous fuels through mains
Also see: Market Sizing (TAM/SAM/SOM) Framework