A handful of U.S. natural gas utilities are giving industry watchers a preview of how the sector could take part in the long-heralded hydrogen economy.
Several pilot projects and research programs show that gas utilities are pursuing different strategies as they take the first steps toward distributing hydrogen to customers. The strategies reflect regional considerations and corporate philosophies unique to the companies, but also speak to the challenges of adopting new energy technologies.
State investigations into the industry's greenhouse gas emissions, a sharper focus on ESG investing and calls to phase out natural gas have increased pressure on gas utilities to tackle those challenges.
Technologies that produce hydrogen at or near the point of use, like the Dish-STARS system, are just one of the strategies that utilities are exploring as they aim to decarbonize natural gas distribution.
Hydrogen, which does not emit carbon dioxide when consumed, presents one pathway to decarbonizing gas grids. Utilities in particular have gravitated towards so-called "green hydrogen," a form of the fuel produced by using renewable electric power to split water molecules through electrolysis.
Green hydrogen methanation in Oregon
In Oregon, Northwest Natural Holding Co. is partnering with the Eugene Water and Electric Board to develop a green hydrogen facility ranging from 2MW to 10MW. The upper range of that capacity would match the largest proton-exchange membrane electrolyzer currently in operation in Fukushima, Japan.
While Northwest Natural is researching hydrogen blending in its gas distribution system, it does not initially plan to inject green hydrogen produced at the proposed facility into its pipes. Instead, it would pair the hydrogen with carbon dioxide to create a synthetic natural gas through a process called methanation.
By pursuing methanation, Northwest Natural expects the project to move forward faster and scale better, Anna Chittum, the company's director of renewable resources, said in an interview.
"One of the big things that we've really learned about power-to-gas in general is that scale really matters in terms of bringing the cost down," Chittum said. "If you're really looking to take advantage of large amounts of renewable electricity and store it as a gas — and then also take advantage of CO2 resources if they're there — a much larger scale methanation project just made a lot of sense and brought down the overall cost of gas that we'll be producing."
Chittum said renewable power and water supply are not limiting factors in the location. Eugene generates 80% of its power from hydroelectricity. Instead, two factors would determine the size of the facility: Northwest Natural's ability to secure local CO2 supplies for the methanation process and projected demand for additional hydrogen supplies from other off-takers, particularly developers of hydrogen fuel cell vehicle filling stations.
Direct hydrogen blending in Minnesota
Meanwhile, CenterPoint Energy Inc. is preparing to produce green hydrogen and blend small amounts directly into its system for distribution to Minnesota customers. CenterPoint Senior Vice President Scott Doyle, who leads the company's eight-state gas utility business, called it a proof-of-concept project and part of the company's goal of reducing its customers' emissions.
"This one project by itself may not necessarily produce a noticeable reduction in emissions across our whole system," he said. "But what it leads us to is an understanding of what kind of scale we would need to use if we were to use this type of technology."
CenterPoint will introduce the hydrogen into its system at a location where it already injects propane and air for peaking services. By starting low and scaling slowly, Doyle's group aims to safely assess the risks of hydrogen blending, including potential embrittlement of steel pipes, leakage and impacts on end-use appliances.
The conservative pace also acknowledges another hurdle: green hydrogen is forecast to become cost-competitive around 2030. Doyle noted that all transitions come with front-end costs that typically fall as innovation sets in and producers become more efficient.
Other gas utilities are seeking to gain experience in hydrogen applications by taking part in a three-year hydrogen production, distribution, storage and use demonstration project in Texas called H2@Scale. One Gas Inc. subsidiary Texas Gas Service Co. Inc. will consult on engineering site plans and provide infrastructure, while Southern California Gas Co. is offering funding, subject matter expertise and technical advice to the U.S. Department of Energy-backed project.
Point-of-use hydrogen production in California
In California, which authorizes utilities to conduct research and development, SoCalGas is also exploring roughly 30 projects linked to making hydrogen, according to Ron Kent, who manages advanced technology development and leads low-carbon resource R&D at the utility. The work spans a range of processes, but Kent's unit is chiefly focused on deploying compact technologies that produce hydrogen at or near its point of use, he said during an Oct. 21 panel at NGVAmerica's natural gas vehicle summit.
"We're not going to focus on centralized hydrogen production because other people are doing that," he said, referring to his group's work. "Our challenge is to do it at a distributed level, and we think that point-of-use hydrogen makes sense from a capex and opex standpoint, because we all know that moving gas through pipeline is less expensive than pressurizing it and sending it on the road."
One example is Dish-STARS — short for solar thermal advanced reactor system — a small steam methane reformer powered by solar energy that produces hydrogen from natural gas and water. The technology makes it possible to inject hydrogen produced on-site into gas systems and can be paired with existing gas and water pipelines to reduce investment costs for new infrastructure.
In August, executives at SoCalGas parent company Sempra Energy said they expect to announce several hydrogen projects in the coming quarters, which may not be limited to the applications that Kent's group is studying. Sempra's San Diego Gas & Electric Co. subsidiary in October set a goal of placing two green hydrogen projects into service by 2022.
Third-quarter earnings commentary on hydrogen has been a mixed bag thus far. Texas and Great Plains gas utility One Gas told investors and analysts it has convened two hydrogen working groups. Meanwhile, NiSource Inc., which operates gas utilities in six states around the top U.S. shale gas region, said the low cost of shale gas undercuts the case for adopting renewable natural gas and hydrogen.