Bullish on hydrogen, Sempra Energy plans for it to 'play a larger role'

Sempra Energy ensured investors Nov. 3 that hydrogen is "going to play a larger role" in the company's growth strategy, and it will use its existing LNG business as a foundation upon which it will build its hydrogen operations.

"We're very bullish on hydrogen," Sempra CEO Jeff Martin said during the company's third-quarter earnings call. "I've made this comment before – we need to win in the business of today while we're building a competitive position in the business of the future. There's no question that across our three growth platforms [Sempra California, Sempra Texas and Sempra Infrastructure], hydrogen is going to play a larger role."

The company's hydrogen bullishness was most recently demonstrated in October, when Sempra Infrastructure entered into an agreement with Avangrid to jointly identify, appraise and potentially develop hydrogen and ammonia projects across the US, with special focus on the US Gulf Coast and West Coast.

And in recent years, two of the company's major California subsidiaries – SoCalGas and San Diego Gas & Electric – have been investing heavily in hydrogen research and demonstration projects. SoCalGas, for instance, proposed plans this year to build Angeles Link, a hydrogen pipeline system connecting the LA Basin to green hydrogen generation sources in the eastern part of the state. SoCalGas says the project, which would be the largest hydrogen infrastructure project in the US, would displace up to 3 million gal/d of diesel fuel.

In September, SDG&E submitted plans to the California Public Utility Commission to build a demonstration project that will test the feasibility of blending 20% hydrogen in an isolated natural gas line serving an apartment complex. Results of the study will be used to help develop a renewable hydrogen blending standard in California.

"Broadly speaking, this is a strategic commitment," Martin said.

Part of this strategy, executives said, involves opening dialogue with the company's LNG customers about decarbonization.

"The LNG business provides a strong foundation for our ability to work with all of those partners as they look to decarbonize and look towards future energy, whether it's green hydrogen, blue hydrogen or blue ammonia," said Justin Bird, CEO of Sempra Infrastructure. "We're excited about the opportunities in front of us."

Gulf Coast, West Coast prices

Platts, part of S&P Global Commodity Insights, assessed green hydrogen produced by PEM electrolysis in the US Gulf Coast at $3.51/kg (including capex) on Nov. 2, while that produced using alkaline electrolysis was assessed at $2.59/kg. Meanwhile, costs for green hydrogen on the West Coast were assessed slightly higher. Green hydrogen produced by PEM electrolysis in Southern California was assessed at $5.89/kg, while that produced using alkaline electrolysis was $4.57/kg.

Both regions are strong candidates to receive funding under the Infrastructure Investment and Jobs Act to become regional hydrogen hubs, a process that the US Department of Energy kicked off in September.

In addition to green hydrogen, both regions are also slated to become green ammonia export-import hubs. Last year, for instance, the Vopak Moda Houston terminal announced intentions to become one of the first low-carbon ammonia import terminals in the Houston port.