Are hydrogen blending and RNG climate solutions?

Gas utilities are struggling to formulate viable pathways forward as both consumer interest and climate policy pushes the American economy increasingly towards electrification. In response, gas utilities have pledged to roll out speculative and expensive technologies to decarbonize their gas networks, such as hydrogen blending and so-called “renewable natural gas” (RNG). But critics say neither of those technologies are economically feasible for heating buildings, leaving the future of gas utilities in doubt.

Electric utilities can generate their power from a variety of sources, whether from coal, gas, solar, wind, or hydro. But gas-only utilities, which exist to deliver gas for heating and cooking, only sell methane gas. That puts them in a bind. With a growing number of U.S. states implementing mandatory emissions reduction targets for major polluters, gas utilities have very few good answers.

Roughly 70 million American homes use gas for heating and cooking, which results in around 560 million tonnes of carbon dioxide released each year, or a tenth of total U.S. greenhouse gas emissions. That doesn’t include all the methane that leaks out of the spider web of gas transmission and distribution lines spread across the country. Including methane takes that tally up to around 1 billion tonnes of CO2 equivalent per year.

To reduce and eventually eliminate emissions from buildings, there is a growing consensus that new and existing buildings need to electrify — equipping buildings with electric water heaters, heat pumps for space heating, and high-efficiency induction stoves for cooking. In short, the logic is relatively simple: Build out renewable energy to clean the grid, and then “electrify everything,” as a popular rallying cry from advocates sums it up. And a growing number of municipalities, counties, and states are putting place policies to make this a reality.

That poses existential questions for sellers of gas. In response, gas distribution utilities are promising to decarbonize their fuel supply by blending in green hydrogen to their gas mix, along with “renewable natural gas,” or methane captured at landfills or industrial agricultural sites, and piped to end users.

SoCalGas, a gas utility in southern California, wants to blend hydrogen into its gas mix and pipe it to college dormitories at the University of California Irvine in a pilot project. That proposal has met resistance.

NW Natural, a gas utility in Oregon, proposed a similar pilot project in the city of Eugene, which would have seen a 5 percent blend of hydrogen with its gas mix. But facing pushback after concerns over safety and criticisms over the meager climate benefits, the utility scrapped the idea.

Despite the hiccups, many utilities continue to hype hydrogen as a climate solution for gas used in buildings. CenterPoint Energy in Minnesota has a small green hydrogen project that came online last year.

National Grid, a UK-based utility with US operations in New York and much of New England, is exploring a 5 to 20 percent hydrogen blend.

“[W]e’re seeing electric and gas utilities in every region of the country claim hydrogen will be key parts of their net zero strategies and/or business plans,” Matt Kasper, deputy director at the Energy and Policy Institute, a utility watchdog group, told Gas Outlook in an email. “On the gas distribution side, I wouldn’t be surprised if every utility has said hydrogen and/or RNG will be part of their business during electrification conversations.”

But many experts see these solutions as expensive distractions.

A recent study looking at the EU and the UK found that using green hydrogen for heating buildings would be at least two to three times more expensive than using electric heat pumps. And using green hydrogen would require five to six times more solar and wind than using heat pumps, cannibalizing clean energy that is needed for the electric grid. In addition, hydrogen causes pipelines to embrittle, raising safety concerns.

Hydrogen is dramatically less dense than methane gas, so even if hydrogen could theoretically be added to the gas mix for home heating, it would not be a one-to-one replacement. For instance, blending in 5 percent hydrogen would contribute less than 2 percent in energy, so the climate benefit would be minor.

“This would be prohibitively costly and disruptive while delivering most customers little novel value,” stated a report from the Building Decarbonization Coalition, a group of NGOs and corporate members promoting electrification.

Taken together, independent experts say there is no future for hydrogen in heating residential and commercial buildings.

A peer-reviewed paper that looked at 32 independent studies found that not a single study came to the conclusion that hydrogen would play a role in heating buildings.

U.S. federal officials agree.

“[The Department of Energy] is firmly saying that that’s never going to happen. The notion that we are going to be heating our homes with hydrogen coming through pipes — that’s never going to happen,” Jigar Shah, the director of the U.S. Department of Energy’s Loans Program Office, said on a recent podcast.

“Renewable natural gas”

So-called “renewable natural gas,” or RNG, is another proposed solution put forth by gas utilities. The supposed climate benefit stems from the fact that this methane — captured from landfills and agricultural facilities — would otherwise escape into the atmosphere.

But RNG has many drawbacks as well. Supply is limited and burning it still results in greenhouse gas emissions.

RNG is also likely to be prohibitively expensive. While major U.S. benchmark natural gas prices traded between $3.5 and $5 per million Btu between 2016 and 2021, for instance, projected prices for RNG in New York would range between $10 and $50 per MMBtu, according to the Building Decarbonization Coalition report.

The sources of RNG are “very limited” and “not necessarily scalable,” Mike Walsh, founding partner of Groundwork Data, an energy transition advisory firm, told Gas Outlook. He was a co-author on the Building Decarbonization Coalition report.

“If you wanted to basically replace all of New York’s residential and commercial gas use with renewable natural gas, you would need the amount of cropland that’s equivalent to two times New York State’s current crop land,” Walsh said. “We’re using [that land] for all sorts of different things that are much better uses than for renewable natural gas.”

Even industry executives admit that there is a ceiling for RNG as a potential solution.

RNG could play a substantial role in the future, but it would be paired with “massive demand reduction up to midcentury,” said Stephen Caldwell, an executive with National Grid, speaking at the CERAWeek Conference in Houston in early March, according to Natural Gas Intelligence.

He admitted that electrification of buildings will result in a downsizing of the gas system.

“At the tail end of that portfolio comes RNG and hydrogen. There’s going to be a residual amount of thermal demand for building heating and other uses that are just going to be really hard to electrify for a number of reasons. And that’s where we see the ability to swap out the fossil gas molecules and swap in clean molecules,” Caldwell said.

Brian Hlavinka, an executive with Williams Companies, a large pipeline firm, didn’t agree with the utility industry’s assessment that RNG can replace fossil gas. When asked whether that was possible, he simply said: “No.”

“So, 0.2% of the makeup of natural gas in the U.S. is RNG,” he said on the CERAWeek panel. Even at those miniscule levels, he said that the growing interest is leading to higher prices for RNG assets, leading to asset price inflation not so different from the scramble for shale acreage in the last decade, which led to soaring costs for land in oil and gas regions.

Walsh said it was “questionable whether [RNG] should be used at all” for heating buildings. The small amounts of RNG available should be reserved for very difficult-to-electrify segments of the economy, not for heating homes and businesses.

Gas utilities face rocky future

Even as utilities promote RNG and hydrogen blending, they are also aggressively fighting electrification policies. They have created a constellation of front groups, funded by utility money, which are running advertisements and opposing appliance efficiency standards, building codes, and other policies promoting electrification.

Utilities and their trade groups have even funded research that arrive at conclusions favourable to the use of their preferred policies. In one notable instance, a study from the University of Massachusetts Lowell recommended the state of Massachusetts explore the use of hydrogen for home heating, and the study was aimed at establishing the basis for legislation in the state capitol. But the funding came from a trade association heavily influenced by gas utilities, and the paper even had been edited by one of the group’s lobbyists, as the Boston Globe reported. Gas utilities and pipeline companies, including National Grid, Eversource, and Enbridge, all contributed funds to the study.

At the same time that utilities are promoting questionable climate solutions, they are also spending heavily to grow their gas infrastructure networks. 16 of the largest investor-owned utilities have plans to spend a combined $94 billion over the next five years on expanding and maintaining their gas infrastructure, according to records compiled by the Energy and Policy Institute.

But in some respects, the trend towards electrification is inevitable. Walsh said that maintaining the gas system will becoming increasingly expensive as it ages, and the dwindling number of customers will have to pick up the tab, which will push up bills even further.

The utilities’ favoured decarbonization ideas — hydrogen blending and RNG — will only exacerbate this problem. “We can’t rely on renewable natural gas to effectively stop that that level of attrition,” Walsh said. “It’s going to increase that pace of attrition…because it’s going to get more expensive.”

Or, put bluntly, he said: “The future of gas is expensive.”

“This is one of the biggest challenges in the decarbonization space — how do we cost effectively electrify our buildings and disentangle ourselves from the gas system?” Walsh said. “But at the same time, we do know that as much of a challenge as that is, maintaining our reliance on gas and meeting our carbon goals, and doing it in a low-risk fashion — that is going to be a much larger challenge.”