An unusual amount of commentary on renewable hydrogen during second-quarter earnings calls offered a view into the nascent U.S. power-to-gas ecosystem, with at least two U.S. utilities staking out leadership positions in the emerging decarbonization strategy.
Executives at large North American utilities and power generators outlined plans to ramp up renewable hydrogen production in the coming years. While they generally agree it will take roughly a decade to scale up the technology, production marks the first step towards ultimately displacing downstream natural gas use, including at local distribution companies, or LDCs.
Power-to-gas involves producing hydrogen through electrolysis, in this case using renewable energy generation. It allows power generators to use renewable energy that would otherwise be curtailed for lack of a storage option, making the so-called green hydrogen an alternative to battery storage, with the added appeal of yielding a low-carbon fuel.
NextEra Energy aims to build on its early-adopter status in battery storage and lead in renewable hydrogen.
"Just like we were in battery storage, we're going to be at the vanguard" of renewable hydrogen, NextEra Energy Inc. Chairman and CEO James Robo said on the company's July 24 quarterly conference call. The company in July announced a $65 million pilot project at its Florida Power & Light Co. subsidiary to produce green hydrogen from solar energy.
Less than two weeks later, with earnings season wrapping up, Sempra Energy CEO Jeffrey Martin declared that his company "made the decision in the last several years that we want to lead in this space." Kevin Sagara, president of Sempra's California utility infrastructure group, said San Diego Gas & Electric Co. and Southern California Gas Co. are working on several hydrogen projects that they will announce in coming quarters.
"As the largest gas utility in the U.S., we believe our scale and commitment to innovation allows us to support renewable natural gas, hydrogen and other technologies required to meet the state's clean energy goals in a way that promotes resiliency of the system and affordability for our customers," Sempra Executive Vice President and CFO Trevor Mihalik said.
Green hydrogen gains momentum at large utilities
Asked whether Southern Co. is thinking about experimenting with green hydrogen production at nuclear power plants, Chairman, President and CEO Thomas Fanning replied, "As a matter of fact, we are."
"I think right now, it's kind of out of the money," Fanning said on a July 30 conference call. "But remember, the job of R&D is to take things that are out of the money and make them into money. That does occupy a certain segment of our R&D budget right now. Funny you should ask that."
"We've been working on hydrogen now for seven years, roughly ... The other thing we're looking at is future gas generation that may be able to use hydrogen as a mix with natural gas or, even at the extreme, exclusively in place of natural gas," Southern Co. Chairman, President and CEO Thomas Fanning said.
Meanwhile, multi-utility FortisBC Inc. is participating in working teams with other Canadian gas distributors to study renewable hydrogen's potential to displace natural gas in industrial processes and supplement the fossil fuel in local distribution systems, FortisBC President and CEO Roger Dall'Antonia said on Fortis Inc.'s July 30 conference call.
Fortis' New York subsidiary Central Hudson Gas & Electric Corp. said in an Aug. 17 filing that the state needs to study renewable natural gas, or RNG, and hydrogen to reduce emissions from the gas distribution system. Another party to New York's proceeding to reform gas planning, National Grid USA, said it is "actively exploring the possibility of utilizing hydrogen to meet supply needs."
National Grid plc on Aug. 5 announced a partnership to build a £10 million U.K. test facility to study hydrogen for heating homes and businesses. CEO and Executive Director John Pettigrew previously outlined plans to test the impact of injecting pure hydrogen and natural gas blends on transmission lines during the company's June 18 call to discuss its full fiscal year results.
The projects underscored an observation that several U.S. utility executives made: Europe remains well ahead of the curve on commercializing renewable hydrogen, a point reinforced during European companies' conference calls.
Gas utilities express cautious optimism
Renewable hydrogen presents an opportunity for gas utilities to respond to growing pressure to decarbonize their distribution systems. But for some utility companies, power-to-gas remains a relatively far-off intervention for many LDC executives.
DTE Energy Co., for one, was less concrete about its plans. DTE President and CEO Gerard Norcia called hydrogen "something we're starting to think seriously about" as a means of effectively storing renewable energy in the Michigan multiutility and midstream company's pipeline and storage systems.
Executives at UGI Corp. — which transports, stores and distributes gas in Pennsylvania — called renewable hydrogen "an opportunity for us to leverage our infrastructure ... and the connection we have to all the end users we serve," but acknowledged the challenges of introducing it into their systems.
Politics and lawmaking will likely play a role in the timing of green hydrogen uptake.
For Portland, Ore.-based Northwest Natural Holding Co., Oregon's recently established rules for delivering RNG to customers include a provision for blending hydrogen into gas supply. On the East Coast, South Jersey Industries Inc. said power-to-gas projects could account for a portion of its clean energy investments geared towards supporting New Jersey's new Energy Master Plan.
Looking to nation-level politics, Calgary-based AltaGas Ltd. president and CEO Randy Crawford on July 30 said he believes renewables will continue to be a big push no matter the outcome of the U.S. presidential election, citing supportive economics. "We'll look for funding on infrastructure to look at new technologies around ... hydrogen and other fuels that may be able to blend into our system," Crawford said.
Former Vice President and Democratic presidential candidate Joseph Biden's infrastructure and clean energy plan calls for funding research to make green hydrogen cost-competitive with conventional hydrogen within a decade.
That timeline aligns with several of the major utilities' expectations. NextEra anticipates hydrogen opportunities will materialize in the 2030 timeframe and beyond, while Sempra said they will arrive in the second half of the coming decade at the soonest. Dominion Energy Inc. on July 31 said it committed in recent years to ensuring its gas distribution system is prepared to accept up to 5% hydrogen by 2030, underpinned by an initial pilot project in advanced planning stages in Utah.
Q2 commentary raises questions about hydrogen end-users
LDCs will have to compete for limited renewable gas supplies with other industries — which is one argument levied by climate activists who say electrification may be a better option for decarbonizing the building sector than flowing RNG and hydrogen to gas utility customers.
When it comes to other industry uses, the NextEra pilot will not produce renewable hydrogen for the distribution system but rather to replace a portion of the natural gas consumed by one turbine at FPL's Okeechobee Clean Energy Center. NextEra Executive Vice President and CFO Rebecca Kujawa raised the prospect of retrofitting other gas facilities to run on hydrogen, and said the company might consider opportunities in the industrial and transportation sectors.
Southern also sees hydrogen replacing all or a portion of natural gas in power generation, according to Fanning. Sagara said Sempra sees opportunities for hydrogen in power generation, industrial processes, refueling and medium and heavy-duty transportation, in addition to its utilities' distribution systems.