AUTHORITARIAN regimes and financial giants with stakes in the fossil fuel industry are among investors who would benefit from plans to use hydrogen to heat UK homes, which critics say could increase fuel poverty.
The findings come from a Ferret analysis of shareholders in Britain’s four gas distribution companies – who are spearheading the push for hydrogen heating as a greener alternative to natural gas.
We found shareholders in these gas firms include the Chinese and Qatari governments, an Australian bank nicknamed the “Vampire Kangaroo” for its tough pursuit of profit, and a New York private equity company whose managing director advised Donald Trump during his presidency.
The gas distribution networks are valuable assets for these investors. Our investigation found that together they paid out nearly £2.4bn to shareholders in the last five years. Using hydrogen for heating is controversial.
Concerns have been raised about its efficiency, high costs to consumers, and the fact the majority of UK hydrogen is still produced from natural gas. Some critics have claimed the technology is being pushed by ‘vested interests’ who fear that their gas industry investments will become stranded assets if there is a widespread switch to heat pumps rather than hydrogen.
Heat pumps run on electricity meaning that gas pipelines would become obsolete.
Campaigners claimed The Ferret’s findings showed the “not-so-hidden” agenda of the UK gas networks is to “keep making profit out of those networks when the UK finally gives up on fossil gas”.
“Hydrogen for heating looks more and more like a corporate con designed to protect the assets of global financial players rather than deliver any real climate action,” one activist claimed.
The trade body that represents the UK’s gas networks said that “industry, businesses and many homes can only be decarbonised if hydrogen is part of the energy mix”.
The Energy Networks Association said dividends paid to investors by the gas networks were “within the regulatory guidelines set by Ofgem”.
Fossil fuel interests
We examined the annual reports and Companies House filings of the UK’s four gas distribution companies – Cadent, Northern Gas Networks, SGN, and Wales & West Utilities.
They are all involved in hydrogen trials of varying sizes across Britain, aimed at proving the viability of the technology ahead of a decision by the UK government about the future of domestic heating, which is due in 2026.
Cadent is the UK’s largest gas distributor and owns much of the networks in the north west of England, Yorkshire, the Midlands and north London. It is owned by a consortium of investors including the Australian bank, Macquarie, and the Chinese and Qatari governments.
Macquarie owns 26 per cent of Cadent making it the company’s largest shareholder. It has been described as the “Vampire Kangaroo” because of its tough pursuit of profit – a moniker it rejects – and is a major shareholder in Aberdeen and Glasgow airports, the National Grid electricity transmission system, and the M6 toll road. The Chinese and Qatari governments own 17 and 8.5 per cent of Cadent, respectively.
China produces more climate pollution than any other country in the world and its overall approach to tackling climate change has been rated as “highly insufficient” by independent analysts. Its emissions increased by 3.4 per cent in 2021 a year when its annual production of coal – the dirtiest fossil fuel and a leading cause of global warming – reached its highest ever level.
Meanwhile, Qatar is a global leader in the production of natural gas and is aiming to expand its production of fossil fuels – with potentially “catastrophic” impacts on the climate – in the coming years. Northern Gas Networks, which owns pipelines in the north east of England, Cumbria and much of Yorkshire is almost entirely owned by two Hong Kong-based investors – CK Hutchison Holdings and Power Asset Holdings.
The same two companies own all of Wales & West Utilities. CK owns stakes in two gas transmission companies in Australia, as well as a gas pipeline in the country. It is also an investor in electricity networks, including in the UK, and the firm co-owns SSE’s Seabank gas-fired power station in Bristol.
Power Assets has investments in 500,000km of electricity and gas transmission networks in countries including Australia, Canada and Thailand. It also has stakes in power generation, including coal-fired power plants. It was named by the UN as one of the 166 companies collectively responsible for 80 per cent of global greenhouse gas emissions.
Three quarters of shares in Scotland gas network operator, SGN, are owned in equal parts by two Canadian investment giants, Brookfield Asset Management and the Ontario Teachers’ Pension Plan (OTPP). Brookfield has investments in major fossil fuel infrastructure projects including in the oil sands and coal sectors.
The UN climate envoy and former Bank of England governor, Mark Carney, is chair of Brookfield Asset Management as well as its head of transition investing. He was quizzed on the firm’s investments in polluting industries by a Westminster committee last year, after The Ferret revealed Brookfield is the ultimate owner of a crucial vessel which will enable oil production at a project called Rosebank in the North Sea if it is approved by the UK Government.
Rosebank is the biggest untapped oil field in UK waters and plans to develop it have been the subject of intense opposition from climate activists. The OTPP held just under £2.7bn of oil and gas investments in its portfolio in 2020 and as well as holding a stake in SGN, it also has a 15.8 per cent share in Puget Sound Energy – a gas distribution company in the US state of Washington.
The remaining 25 per cent of SGN is owned by the New York-based private equity firm, Global Infrastructure Partners (GIP). GIP owns stakes in Edinburgh and Gatwick airports and has investments in fossil fuels. It was part of a consortium that bought a 49 per cent stake in the Abu Dhabi’s national oil company’s gas pipeline business in 2020.
It also has a major stake in a huge new natural gas extraction project in Australia. GIP’s founder and managing director, Adebayo Ogunlesi, served on Donald Trump’s business advisory council when he was US president.
‘Not-so-hidden agenda’
According to Dr Richard Lowes, an expert in sustainable heating from the University of Exeter, “the role of hydrogen in heating looks extremely limited and these companies have the same information I do so clearly their lobbying and PR strategy is primarily about protecting their own interests.”
Lowes told The Ferret: “When the energy industry was privatised, mass foreign ownership was not the intention and the fact that these asset owners are now lobbying the British state is alarming from a sustainability and energy security perspective.”
Alex Lee, a climate campaigner at Friends of the Earth Scotland (FoES), agreed. “It is hard to believe these organisations are acting in the interests of the climate when you see the fossil fuel infrastructure and polluting airports that are also on their books,” she said.
“The scientific evidence has shown for some time now that using hydrogen to heat our homes would be a costly and inefficient plan that serves only to prolong the lifetime of fossil fuels and their infrastructure such as gas pipelines.
“Hydrogen for heating looks more and more like a corporate con designed to protect the assets of global financial players rather than deliver any real climate action.”
FoES’ former director and freelance environmental campaigner, Dr Richard Dixon, said our research revealed the “strong fossil fuel interests behind the push for hydrogen”.
“The not-so-hidden agenda of the companies who own gas networks is to keep making profits out of those networks when the UK finally gives up on fossil gas,” Dixon argued.
“They clearly see the use of hydrogen made from natural gas as the way to prolong the life of their fossil fuel investments, even though climate change means the world instead needs to exit fossil fuels as quickly as possible.”
Sarah Bierman Becker, fossil fuel campaigner at Global Witness, said it was “depressing but sadly not surprising to learn of the toxic financial interests behind some of the UK’s biggest hydrogen proponents”.
Bierman Becker added: “The global drive for hydrogen, which the UK seems to be at the forefront of, is coming squarely from a fossil fuel industry overwhelmingly responsible for the climate crisis.
“Hydrogen is a way for those companies to do the same toxic practices that have brought the world to the brink of disaster, hidden behind a phoney green PR spin.”
A spokesperson for Energy Networks Association, which represents all four UK gas distribution companies, said: “Industry, businesses and many homes can only be decarbonised if hydrogen is part of the energy mix, alongside electrification.
“That’s why it’s essential that we rule nothing out as we continue to deliver the government’s plan for decarbonisation. This will also create choice for customers in the type of energy they use.
“Any dividends paid to investors are within the regulatory guidelines set by Ofgem and have to meet strict rules to ensure businesses are sustainable and creditworthy.”
Northern Gas Networks argued that there is “no one-size-fits-all” solution to cleaner heating and decarbonising homes will only be achieved if “all technologies are in play”.
“With 85% of UK homes connected to the gas grid, it’s vital we explore how it can be converted to transport clean hydrogen to deliver on the government’s plan for decarbonisation by 2050.
“This will ensure customers can continue to benefit from choice in the type of energy they use in their homes, and a secure, resilient network.”
The Ferret has contacted all of the investors named in this story for comment.
