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NW Natural tees up carbon capture pilot, advances renewable gas initiatives

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According to Market Intelligence, December 2022

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NW Natural tees up carbon capture pilot, advances renewable gas initiatives

Northwest Natural Holding Co. is adding carbon capture and usage to the list of decarbonization pathways being piloted at the Portland, Ore.-based natural gas utility operator.

The company is working on a pilot program using CleanO2's CarbinX unit, a type of direct capture technology that captures carbon dioxide emissions at the point of combustion, executives said during a Nov. 8 conference call. The company's gas utility, Northwest Natural Gas Co., which operates as NW Natural, is partnering with some of its larger commercial customers to outfit their existing gas furnaces and boilers with the small-scale CarbinX units.

The technology reduces energy use, captures carbon emissions and converts the CO2 into potassium carbonate, a raw material used in soap, Northwest Natural President and CEO David Anderson said. CenterPoint Energy Inc. has already piloted CarbinX units in Minneapolis, while ATCO Ltd. and FortisBC Holdings have launched pilots in Alberta and Vancouver, British Columbia, respectively, according to Northwest Natural.

"Several other direct capture technologies are approaching commercialization, and we expect adoption rates to continue to grow and are excited to be on the cutting edge of this innovation," Anderson said.

Northwest Natural identified direct capture technology as an emissions reduction pathway that could complement hydrogen and renewable natural gas, or RNG, in helping the company achieve carbon neutrality by 2050.

Renewable fuels strategy

On the hydrogen front, the company's engineering team plans to increase its hydrogen blending tests from 5% to 10% of gas volume in the coming weeks. The team aims to test a 15% hydrogen blend at its Sherwood, Ore., test facility by year-end.

NW Natural withdrew its application for a hydrogen blending pilot project in West Eugene, Ore., on Nov. 1, saying it needed to conduct additional outreach to address community concerns. The company remains on track to start up a separate pilot project in spring 2023 testing distributed hydrogen production through methane pyrolysis, sometimes called turquoise hydrogen.

"There's a lot of excitement about turquoise hydrogen because it has potential to be one of the lowest-cost low-carbon fuels," Northwest Natural Chief Marketing Officer and Senior Vice President of Operations Kim Rush said. "We're anticipating that this kind of equipment, if it proves out, really has the flexibility to be located in a variety of areas on our system."

The company's focus remains on integrating low-carbon hydrogen into NW Natural operations, though Anderson believes that there will be "other investment opportunities" beyond the utility, particularly in light of hydrogen production tax credits in the Inflation Reduction Act. A year ago, Northwest Natural established a nonregulated subsidiary, NW Natural Renewables Holdings LLC, to supply renewable fuels to customers around the U.S.

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The first two RNG supply projects under development at NW Natural Renewables remain on pace for startup in spring 2023. Asked about its future project pipeline, Anderson said executives would likely offer more details early in 2023 on how NW Natural Renewables is addressing the RNG market.

With large companies entering the RNG space, Anderson said NW Natural can remain competitive by investing in smaller developments and tailoring its approach to each project. "If these bigger companies are spending a lot of time on the smaller projects, I'm not sure the returns are going to be what they want them to be."

Earnings results

Northwest Natural on Nov. 8 reported a net loss of $19.6 million for the third quarter of 2022, which includes the second half of the shoulder season. On an EPS basis, the net loss of 56 cents beat analysts' estimates for a loss of 72 cents per share and narrowed from a year-ago loss of 67 cents per share.

The company reaffirmed its 2022 full-year guidance of $2.45 to $2.65 per share.

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