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Gas pipeline giants chart path to cleaner energy

Even as pipeline executives stuck by their traditional position that natural gas is a bridge between society's fossil fuel present and a renewable energy future, they have begun to offer more details about how the midstream sector can accommodate cleaner fuels.

During the Barclays CEO Energy-Power Conference on Sept. 9, Kinder Morgan Inc. CEO Steven Kean said the pipeline giant's gas business has a "decadeslong runway," but the company also sees demand for hydrogen adding to its assets' longer-term value. Hydrogen gas can mix with natural gas to move through gas pipelines and is clean burning: When pure hydrogen is burned, it combines with oxygen to release energy and water.

"Midstream infrastructure is well-suited to it, even largely the way it is today," Kean said. "We could accommodate between 5% and 10% hydrogen content, and as we're looking at some of the downstream uses, typically the downstream uses can accommodate about 5% to 10%."

Flowing more hydrogen through Kinder Morgan's pipes would necessitate investments in new technologies and retrofits to prevent corrosion, Kean added, but it still creates "another opportunity for midstream natural gas infrastructure," particularly as utilities outline plans to ramp up renewable hydrogen production.

There is a growing consensus that the midstream sector will need to get into the renewable energy infrastructure business to grow long-term as demand for traditional pipeline assets winds down, according to Regulatory Research Associates analyst Brian Collins.

"Midstream enterprises that choose to wade into renewables could be instrumental in building, owning, and operating generation, and the associated supporting infrastructure such as transmission and storage," Collins wrote in July. "Long-term cash-flow stability for midstream businesses could be enhanced through power purchase agreements with utilities, retail energy businesses, commercial, industrial, institutional, government and military off-takers. Power purchase agreements help midstream businesses fulfill goals to increase their levels of fee-based and contractually-guaranteed cash flows."

Kinder Morgan's pipeline peer Williams Cos. Inc. has already committed to investing in new solar installations and renewable natural gas projects as it plans to become a net-zero carbon emitter in 2050. Those renewable gas opportunities — combined with "next-generation" technologies like carbon capture, use and storage, and with the use of hydrogen as a fuel source — could account for more than 50% of emissions reductions during that period, according to the company's plan.

At the Sept. 9 conference, however, Williams President and CEO Alan Armstrong emphasized that "the way to reduce emissions right here, right now — not dreaming about what technology might be available in the future — ... is to combine renewables with natural gas power generation."

Even in states like North Carolina and Virginia that could skip natural gas altogether by converting coal-fired plants to renewable energy sources, "gas is probably losing the popularity contest, but very functionally continuing to gain ground in market share," Armstrong said.

Still, that is not stopping utilities like Consolidated Edison Inc. from getting out of the gas transmission business. In August, the company said it will no longer invest in long-haul gas pipelines and may sell its existing portfolio of such infrastructure, which includes stakes in the Stagecoach Pipeline & Storage Co. LLC joint venture with Crestwood Equity Partners LP and the Equitrans Midstream Corp.-led Mountain Valley Pipeline LLC.