Gas utilities are working to figure out their roles in an increasingly climate-conscious world, especially as more energy regulators and consumers begin to seek out non-fossil fuel sources.
Interest in 100% renewable power has accelerated in the U.S., setting the stage for a potentially dramatic shift in operations for the nation's power utilities. The push to get away from fossil fuel in the power sector has also come with talk of electrification, or replacing common gas-fired appliances and systems with electrically powered ones.
Proponents of electrification would prefer for gas stove users to switch to the electric version of the appliance.
Gas utilities, however, are staking out their roles in the evolving energy space, looking to non-fossil gas sources, hydrogen-focused technologies and other means to align themselves with those looking to bring down greenhouse gas emissions, a number of gas utility executives said at the American Gas Association Financial Forum recently.
Bret Lane, Southern California Gas Co.'s executive chairman and CEO, heads one of the nation's largest gas utilities in a state with aggressive climate goals. Lane describes California as a "battleground" for addressing and combating climate change. There, Sempra Energy subsidiary SoCalGas has become one of the most vocal proponents of "renewable natural gas," or gas derived from biologic sources and purified to pipeline quality. In conversations with regulators, elected officials and gas utility peers, the company has raised the idea of using renewable natural gas as a way to reach emissions reduction goals sooner than the state would able to with its all-renewable power targets, he said.
"I think we're getting more and more people listening," Lane said in an interview at the Fort Lauderdale, Fla., event. "Getting to that 100% [renewable portfolio standard] is going to be very difficult, technically. … Are there other pathways that can get us there less technically and more affordably? … That's not been part of the conversation a lot."
Renewable natural gas, or RNG, captures methane that would otherwise be released to the atmosphere. Methane is a potent greenhouse gas, but when burned, it releases carbon dioxide, which has significantly less global warming potential. SoCalGas has set a goal of getting 20% of its fuel supply from RNG by 2030, Lane said, noting that the resulting decrease in methane emissions would be the greenhouse gas emissions reduction equivalent of substantial electrification but would not require widespread appliance replacement.
Dairy farms can be a source of biogas that can be purified to serve as a pipeline-quality fuel.
To grow the RNG market, Lane said he wants to see regulators set not only renewable portfolio standards for power but renewable gas standards for utilities.
"If we're required to buy 5% of our supply from renewable gas, the market is going to react to that," Lane said. "Now, all of a sudden, these dairies are going to want to connect up and get that gas into the system. Landfills, wastewater treatment plants – they're going to want to start selling into the market something to them that's a costly byproduct today."
Chesapeake Utilities Corp. takes a similar view on RNG's potential role in curbing the nation's overall emissions, and company executives on the sidelines of the AGA event highlighted the potential fuel sources for the company from cattle farms in Florida to chicken farms in the mid-Atlantic region.
"People always assume that those of us that are in the combustion fuel business are somehow anti-environmental fuels, and it's just not the case," Chesapeake President, CEO and Director Jeffrey Householder said on the sidelines of the AGA event, emphasizing that his company is in the business of moving energy, whatever the source. "One of the key focuses is … trying to find renewable natural gas sources coming out of landfills, coming out of industrial agricultural businesses. … There are all sorts of opportunities like that."
Both Lane and Southwest Gas Holdings Inc.'s head, John Hester, also pointed to the potential for excess power from renewable resources — such as solar energy collected during low-power-use times of day — to be put to work on hydrolysis, a process that releases hydrogen from water or air. Hydrogen is a flammable gas that can be used as a fuel source.
Michael Picker is the president of the California Public Utilities Commission. His state has passed legislation stating all investor-owned utilities in the state will need to procure 100% of their generation from carbon-free resources by 2045.
"There are opportunities to do blending of hydrogen with methane, so I think there are a lot of really good opportunities for natural gas companies, and the natural gas industry, to make significant gains in reducing carbon dioxide emissions in the short run, but I think it's also a very positive long-term play as well," Hester, Southwest Gas' president, CEO and director, said on the sidelines of the AGA event.
Russell Feingold, vice president of the consulting group Black & Veatch, noted that utility investors may benefit from increased investment in new technologies that grow the companies' rate bases, so long as the customers can support the spending. "The utilities are businesses, too, and looking for ways to provide benefit to customers at the same time they're trying to grow earnings," he said. "They've got shareholders, too, obviously."
But pushback on climate policies may come as customer costs rise, Feingold and several executives noted. Majorly disruptive changes to energy supplies and usage could create high costs or even backlash, Joe Hamrock, NiSource Inc.'s president, CEO and director, said in an interview.
"I think it's important to look at an orderly transition so that we're not making abrupt decisions in the policy arena that create significant disruption for customers and communities and the business itself," Hamrock said.
Feingold, too, sees consumer consequences as a material limiting factor on what kind of investment will be possible.
"There's a cost consequence to it, and ultimately, what is the impact on the consumer?" Feingold said. "That's going to be critically important."