BY David H. Coburn
There are many paths to net-zero, and the broader goal of decarbonizing the U.S. economy by 2050 will require natural gas to play a fundamental role.
That’s the key finding of Net-Zero Emissions Opportunities for Gas Utilities, a comprehensive analysis conducted for the American Gas Association by consulting firm ICF and released in February 2022. The 161-page study outlines four key strategies that focus on ways gas utilities can reduce methane and carbon dioxide emissions from their operations and customer use of natural gas:
The study also issues a clarion call for policy and regulatory support to implement new programs and to develop and scale more efficient and lower-carbon gas technologies. “This study is significant because it establishes a variety of pathways member companies can use to get to net-zero,” said Jeff Lyng, area vice president of energy and sustainability policy for Xcel Energy in Denver. “Equally important is this call for the technology innovation and policy innovation that we’re really going to need to get there. That’s the most exciting part of this report to me.”
The technical analysis—which bolsters the case for natural gas as a foundational component to meet emissions reduction goals while keeping energy resilient, reliable and affordable—is incredibly valuable, said Joanne Mello, vice president of corporate sustainability for Southern Company Gas.
“It really represents a response to some policy proposals that we’re seeing to essentially ban natural gas and mandate 100% electrification, decarbonizing in a way that’s going to disregard the safety of our customers and the reliability of the electric grid and its impact on the economy,” Mello said.
Conversations with Mello, Lyng and other members of the study steering committee from National Grid, Southern California Gas Company and Spire also underscore the same message: These pathways are “illustrative” rather than “prescriptive” because there is no one-size-fits-all approach. Every gas utility will need a different set of solutions and a different emphasis on certain strategies depending on highly localized factors that include climate, the composition of housing stock, the commercial and industrial base, and the greenhouse gas intensity of existing electric generation, transmission and distribution infrastructure.
All four strategies, however, present pathways for gas utilities to get to net-zero by 2050 and to contribute to economywide goals.
While not the bright, shiny object of emissions-reduction strategy, demand-side management, or DSM, nevertheless will continue to be a critical workhorse in all gas utilities’ plans to reach net-zero. And for good reason: Customer use accounts for 80% of all GHG emissions associated with natural gas utilities, which in turn account for 12.8% of all U.S. emissions.
Energy efficiency is a low-cost, cornerstone emissions-reduction strategy, and gas utilities have a successful track record to build on. Residential emissions per customer are down 47% since 1971 thanks to continuous gains in the efficiency of gas appliances, improved building envelopes and conservation.
New technologies including gas heat pumps and high-efficiency gas appliances, wider adoption of programmable thermostats, building shell retrofits, and the expansion and enhancement of utility energy efficiency programs are key elements of the energy efficiency pathway outlined in the study.
Southern Company Gas, which serves 4.3 million customers in Georgia, Illinois, Tennessee and Virginia, had its own study done by ICF, which illustrated a pathway with a major focus on energy efficiency and how ramping up the use of RNG can support emissions reduction efforts while providing benefits to its customers and communities.
The analysis estimated that pathway would result in 25% greater GHG reductions at half the cost of the mandatory 100% electrification strategy that was modeled in the study, Mello said.
The company also is launching new energy efficiency programs at its Atlanta Gas Light and Chattanooga Gas subsidiaries and is building on successful programs at Nicor Gas and Virginia Natural Gas. The Nicor Gas program has saved more than 197 million natural gas therms and avoided more than 1 million metric tons of CO2 emissions since its inception in 2011. A new feature of the AGL program is a rebate for customers who want to convert to a higher-efficiency gas appliance from an older gas appliance; AGL previously offered rebates only for electric-to-gas conversions.
All four of the company’s subsidiaries are also part of the North American Gas Heat Pump Collaborative, a group of utilities working to promote innovation in energy-efficient technologies. “Both the AGA study and our study highlight the opportunities for gas heat pumps to decrease customer energy usage for space heating and water heating by up to 50%, so there is a tremendous opportunity to incorporate gas heat pump technology into utility energy efficiency programs when it becomes commercially available for residential customers,” Mello said.
The most attention-grabbing of the four pathways might be the one that prioritizes the development of RNG, hydrogen and other low-carbon gases—initially blended with and, in some strategies, replacing much of the natural gas in the pipeline by 2050.
According to the study, large volumes of low-carbon gases will be required to meet the economy-wide 2050 net-zero target. That need opens the door for gas utilities to leverage the unique advantages of natural gas distribution and storage infrastructure to deliver clean energy and accelerate climate goals.
Nowhere is the buzz over hydrogen louder than in California, where SoCalGas earlier this year proposed its Angeles Link. The project, which the utility calls the largest green hydrogen energy infrastructure system in the United States, will supply the Los Angeles Basin with green hydrogen produced through electrolysis using the state’s abundant solar and wind energy resources.
“The key is that the only way to bring those green molecules to the demand centers at a low cost and in a safe manner is by pipe,” said Yuri Freedman, senior director in the Clean Energy Innovations Group at SoCalGas. “That’s where the natural gas industry’s skill set comes to the table in a really important way.”
National Grid also has big plans for RNG and green hydrogen, announcing in April its plan to become not only carbon neutral but also fossil-free by 2050. The utility, which has nearly 3.5 million gas customers and 2.9 million electric customers in New York and Massachusetts, intends to ultimately replace natural gas in its network with a combination of RNG sourced from throughout the eastern United States and green hydrogen from onshore and offshore wind and solar. “Our plan has zero geologic gas by 2050,” said Don Chahbazpour, director of regulatory strategy-future of heat for National Grid.
But paths will vary based on regional characteristics. For example, low-carbon gas—and specifically green hydrogen—may not be a viable pathway for utilities in some areas with no excess wind or solar power within its geography to fuel electrolyzers.
Spire is exploring RNG options, particularly in Missouri, where recent legislation allows the utility to offer renewables to its regulated customer base. While green hydrogen might not be on the table right now, Nick Popielski, Spire’s vice president of business and economic development and head of environmental commitment, said the potential of blue hydrogen—produced using natural gas as a feedstock to reform methane into hydrogen—is significant enough to warrant greater evaluation to see if it is applicable in the company’s service territories.
Southern Company Gas has renewable gas interconnection programs in place in Georgia and a pilot program approved recently in Illinois. It is also seeking regulatory approval in Virginia for a similar pilot program that would enable the integration of RNG, which Mello calls a “drop-in replacement” for geologic natural gas that can help trim emissions. The company also is pursuing R&D projects to determine how to introduce hydrogen into its infrastructure.
For gas utilities in cold-weather regions such as the Rockies, Upper Midwest and Northeast, the study identified the use of dual-fuel or hybrid gas-electric heating systems as a pathway to significant emissions reductions, helping to optimize energy use while ensuring the reliable delivery of energy during peak winter demand periods.
Xcel Energy—which serves natural gas customers in Colorado, Michigan, Minnesota, North Dakota and Wisconsin—is looking at hybrid, or dual-fuel, gas-electric heating systems, which use an electric heat pump for spring and fall heating and maintain a gas-fired furnace to handle cold winters. Hybrid systems are also an important part of the clean energy vision National Grid unveiled in April for its customers in New York and Massachusetts.
The concept addresses one of the potential risks inherent in proposed mandatory 100% electrification policies and speaks directly to why natural gas is considered foundational to meeting net-zero goals: The electric grid may strain or be unable to meet demand on the coldest days of the year.
Demand for natural gas for space heating during peak winter months is 58% higher than the peak electric demand for cooling during peak summer months and 84% higher for all end uses, according to the AGA study. Some combination gas-electric utilities, including Southern Company, parent to Southern Company Gas, said their winter peaks are growing at a faster rate than summer peaks.
“The ability of gas infrastructure to store and transport large amounts of energy to meet seasonal and peak-day energy use represents an important and valuable asset that should be leveraged to help meet net-zero goals,” the AGA study concluded.
Xcel Energy’s Lyng said his utility will be working with customers to help them understand the benefits of the hybrid option and when it might make sense for them to make the switch.
“For customers who are replacing an air conditioner, for example, that might be an opportune time to look at a heat pump, so that you get the spring and fall heating benefit but you keep the boiler, you keep the furnace in the home for those really cold peak heating times,” Lyng said. “And in so doing we’re not overburdening the electric system, and you’re really optimizing the use of both systems.”
The fourth route to net-zero, dubbed the “mixed-technology” pathway, is an all-of-the-above approach that many utilities are exploring. It involves considering all potential emissions-reductions strategies, including, of course, stepped-up efforts to mitigate emissions from their own distribution and storage systems.
Xcel Energy is a good example. The combination gas-electric utility is focused on energy efficiency, hybrid heating systems and RNG/low-carbon-gas pathways. Plus, it has also committed to reducing upstream emissions by purchasing only certified low-methane-emissions natural gas, with a 2030 net-zero methane goal for its own system. It’s pursuing regulatory approval for beneficial electrification for some of its customers and plans to seek some of the $62 billion in R&D funding in the federal infrastructure bill to implement its strategy. And it is also seeking approval of a voluntary program that would support RNG projects and let customers reduce their own carbon footprint by paying a premium for a blend of RNG and carbon offsets.
In addition to low-carbon gas and hybrid heating, National Grid’s clean energy vision doubles down on the company’s energy efficiency programs and includes using geothermal heating for some homes. And in a region of the country where oil is still widely used as a heating fuel, it has a program to convert some oil users to electric heat pumps.
Cutting direct utility emissions is, of course, part of every utility’s net-zero game plan. Although the AGA study points out that local distribution company operations account for only 2% of GHG emissions associated with gas utilities, it’s the one source of emissions utilities control directly and need to manage for safety and reliability. The study points to replacement of cast iron and unprotected steel in transmission and distribution lines, use of advanced leak detection tools and low-carbon fuels in fleet vehicles, and improved energy efficiency in utility buildings as important emissions-reduction measures going forward.
The rationale behind the mixed-technology pathway is simple. As gas utilities attempt to engineer a historic energy transformation within a severely compressed time frame—launching pilot programs to see what works and what customers want—it just doesn’t make sense to leave any options off the table.
“It’s early days, but it’s exciting, too, in that regard, that we are really on the cusp of this rapid transition,” Lyng said. “That’s why, in our view, now is the time for this mixed-technology strategy to really see what solutions are going to scale. And it’s all about that, ultimately—moving from pilot to scale.”
The transformation needed to get natural gas utilities and the economy to net-zero simply won’t happen without fundamental changes in energy policies, building codes, rate designs and cost-recovery mechanisms to facilitate ambitious projects like SoCalGas’ green hydrogen Angeles Link or National Grid’s vision to become a fossil-free energy company by 2050.
As the AGA study points out: “Many or most of the actions that gas utilities can take to reduce carbon emissions will require approval from regulators.”
One regulatory need is for fuel-neutral policies that maintain consumer choice, allowing utilities to implement strategies outlined in all four of the “illustrative pathways”—something for which individual utilities and AGA have been tireless advocates in the face of mandatory electrification proposals.
In Xcel Energy’s markets, the utility has been successful in securing legislative support for policies that lift fuel-switching restrictions and provide a pathway to submit emissions reduction plans to regulators, within guardrails of reliability and affordability, such as the Clean Heat Standard in Colorado and the Natural Gas Innovation & Eco Acts in Minnesota.
More broadly, the study points to a need for policies and regulations that help create market structures and incentivize demand for RNG and low-carbon gases, in much the same way that renewable portfolio standards helped bring about the solar and wind energy markets.
“In regions where RNG is already required or incented, significant volumes of projects have been developed, facilitating the decarbonization of the gas supply,” the study states.
For example, legislation approved in California requires gas utilities to source 12% of their gas supply from renewables by 2030, the kind of procurement target National Grid’s Chahbazpour calls a “game-changer” that needs to be emulated across the country. “This is exactly what the industry has needed,” he said. “We don’t yet have that in New York and Massachusetts, and we need exactly that to make our vision a reality.”
Policy support for the evolving role of gas utilities in the energy system also implies support for ongoing research. Low-carbon gas should get a huge lift from the Infrastructure Investment & Jobs Act, which SoCalGas’ Freedman calls a “once-in-a-lifetime opportunity to accelerate the energy transition by allocating funds for hydrogen hubs, carbon capture and sequestration, and other technologies.”
Of course, policy and research support hinges on the industry’s success in changing the conversation about America’s energy future, while educating policymakers and regulators about the potentially disastrous implications of mandatory electrification.
The study advances that cause, making the case for an energy future that includes natural gas and its distribution and storage infrastructure. It’s a system, after all, that supplied 34% of U.S. energy needs in 2020 and piped affordable, reliable heat into more than 50% of American homes even on peak demand days.
“The AGA study confirms the conclusion that seems to be reaching broader and broader audiences, that for a low-carbon, resilient energy future, we will need a combination of clean electrons and clean molecules,” Freedman said. “That has been missing in some of the dialogue for the last decade or so, but I think this study is an important step in that direction.”
For more on AGA’s Net-Zero Emissions Opportunities for Gas Utilities—including the full study, a fact sheet, and a brief on industry progress on climate change—visit www.aga.org/netzero.