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Our views 09 December 2019

Gas utilities in a net zero economy: avoiding Ofgem’s death spiral

By Matthew Franklin, Senior Credit Analyst, Beth Goldsmith, Responsible Investment Analyst, and Tom Johnson, Responsible Investment Analyst

5 min read

In June 2019, the UK committed to a legally binding target of net zero carbon emissions by 2050; an ambitious aim which will impact every sector of the economy, as well as closer to home.

2018 was the first year in which the UK’s households emitted more CO2 into the atmosphere each year than its power stations, according to provisional government figures. Much of this comes from burning gas in order to heat our homes, our water and our food. A relatively small number of companies are involved in moving this gas through the nationwide transmission network, into the local distribution networks and, finally, into our homes.

To better understand the sector and what future (if any) it has in a world of net zero, in October and November 2019, RLAM engaged with the companies which transport this gas in local areas – SGN, Wales & West, Cadent and Northern Gas Networks. We also met with operator National Grid, the transmission network, and Ofgem, the regulator.

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