This is the third in a three-part series Utility Dive is publishing this week looking at the emerging business and policy landscape for hydrogen in the United States. The first part examined regulatory challenges around hydrogen while the second focused on expanding electric utility activities with the resource.
Nestled amid the rolling hills and rivers of the Pacific Northwest, the Eugene Water & Electric Board (EWEB) has the sort of problem many U.S. utilities still dream of: too much renewable energy.
With the rapid expansion of wind generation in the past 20 years, the Eugene, Oregon, utility now finds itself with a power surplus in the spring, when the rivers from which it also draws energy are high, EWEB spokesman Joe Harwood said. So when nearby gas utility NW Natural reached out about the prospect of partnering on a hydrogen pilot project, the proposal made sense.
"We think it's a viable opportunity to make hydrogen and sell it, first to NW Natural, and perhaps down the road, sell it as a commodity to others who want it," Harwood said.
Hydrogen, in EWEB's view, represents a major opportunity for the utility to extend the reach of its renewable resources into new regions and industries, expanding the company's decarbonization ambitions beyond its own portfolio. NW Natural, also a strong proponent of green hydrogen, shares this vision of using its existing natural gas pipeline network as a means of distributing and storing clean energy.
But while a growing contingent of natural gas utilities argue the nation's existing gas infrastructure is a critical piece of the hydrogen puzzle, electric and dual-fuel utilities exploring hydrogen don't always share this view. In addition, gas is far from the only sector looking to hydrogen as a source of future opportunities. Major oil companies, transportation providers, even tech startups are all vying for the same green hydrogen partnerships with electric utilities, some of whom aren't convinced gas utilities represent an essential part of the puzzle.
The business of transportation
Emily O'Connell, director of energy markets policy for the American Gas Association (AGA), looks at the last 10 years of evolution in the energy industry and feels a sense of excitement.
"I hear about new ideas, new concepts practically every day," she said, "so it's a super-exciting time to be in the industry. ... From where I sit at AGA, and having the opportunities to talk to so many different stakeholders in and out of [Washington,] D.C., I've never seen the momentum, and — no pun intended — energy around a fuel like hydrogen."
O'Connell believes gas utilities fit naturally into the hydrogen conversation. Full electrification would dramatically increase the load on the grid, requiring expensive upgrades and expansion, O'Connell said. But there's already 2.6 million miles of pipeline across the nation that could move energy around in the form of molecules, she noted. Electric utilities could generate hydrogen and inject it into the natural gas system, reducing the strain on the grid and keeping costs low by taking advantage of the natural gas infrastructure that already exists.
"We are a bread truck, and molecules are the bread," said Kimberly Denbow, AGA's managing director of security and operations. "Different molecules will have different impacts on materials and compatability, and that is something we need to get into with research, but looking at it from a bigger perspective, we really are just delivering bread."
"We see traditional renewable energy players — solar and wind — as the entities that are very likely to engage in using excess capacity to produce hydrogen, and we see ourselves as the entity to move that hydrogen."
Vice President of Clean Energy Innovations, Southern California Gas Co.
To continue Denbow's metaphor, creating a new hydrogen delivery system would be like buying a new truck. All that needs to happen to avoid that expense and difficulty, Denbow said, is to invest in the research necessary to determine how hydrogen might work if it were injected into the gas system. But she worries that value could be lost if the current conversation about renewable energy continues to focus on a handful of resources and does not include the natural gas industry.
"We're all in the same boat, so we have to stop pushing each other off the boat," she said. "I think if we all steer in the same direction, we will get there faster."
At Southern Co., a dual-fuel utility researching both hydrogen production and the potential for blending it with its own natural gas, Mark Berry believes hydrogen has the potential to usher in a new era of cooperation between companies in once-distinct industries. Companies that have a shared need for a resource like hydrogen might even co-own needed infrastructure like pipelines in the future, he said.
But Berry, Southern Co.'s vice president of research and development, is not sure the vision of electric companies generating hydrogen and selling it to natural gas companies is going to pan out as some expect.
"If you were talking to natural gas people, they will tell you there are concerns with how much hydrogen could blend into existing infrastructure. While that is valuable infrastructure right now, it might not be if you want to use 100% hydrogen in a pipeline," because existing pipelines may not be suitable for carrying pure hydrogen, Berry said. "I would not necessarily make the leap of faith without looking at the application and the percentage of hydrogen that you need," he added.
"Like the wind- and solar-sector industries, any time an industry is expanding and growing, you're going to have a lot of first-timers, a lot of people who jump in, and then the market just weeds them out naturally."
Executive Director, Renewable Hydrogen Alliance
As Berry sees it, large-scale adoption of hydrogen is going to require new infrastructure, just like any other new technology did. Take EVs, for example. Some existing assets can be used to support the deployment of EVs, Berry said, but to take full advantage of the EV's potential requires new technologies. And it's not like we haven't done so before, he added.
"Thirty years ago, data centers weren't even on the map, but now we have all this data infrastructure," he said. "That was not contemplated 30 years ago, and it's going to continue to change. We have to respond to customer needs. If that means we have to build new infrastructure or change this infrastructure, then that's what we'll have to do."
Berry doesn't see the prospect of building out new energy infrastructure as daunting, in part because he doesn't expect it will happen all at once. Hydrogen remains too expensive for large-scale applications like energy production and will likely enter specialized markets in phases as the price point makes sense. It might start with niche applications like fueling forklifts in the massive warehouses operated by retailers like Walmart and Amazon. So the needed infrastructure could be built out in pieces, Berry said.
"What companies need to be thinking about is, what are the customer's needs" and how hydrogen will be used in the near term, rather than focusing on existing infrastructure, Berry said.
Integrated energy systems
The role gas and electric utilities might play in a future hydrogen-powered economy doesn't need to be an either/or proposition, according to Kristine Wiley, vice president of the Hydrogen Technology Center, which the Gas Technology Institute (GTI) created two years ago to explore hydrogen technology. Rather than one sector coming to dominate the other, Wiley believes hydrogen could bring about a more integrated energy system — one that is both more flexible and more resilient.
"When we look at what our energy system is going to look like in the future, we do envision one that is much more integrated across our energy systems, whether we're talking about gas or the electric grid," Wiley said. "One that we feel will need to utilize both electrons and molecules."
Decarbonization creates challenges that neither sector has the ability to solve on its own, according to Mike Rutkowski, GTI's senior vice president of research and technology development. Providing heat in the winter in northern climates requires massive amounts of energy. That need has been well-served to date by fossil-based energy that's difficult to fully replace in such regions, he said. For electric utilities to meet that need, they would require greater long-term energy storage capacity than currently exists.
"Currently, the amount of natural gas storage, in the energy equivalent, is about 500 GW that can be stored and withdrawn," Rutkowski said. "That's roughly 20 times the amount of energy storage we currently have in the electric system."
Many proponents of green hydrogen hope the gas will enable them to capture intermittent renewable resources and store their energy long-term by converting the electricity into a molecule that can be tucked away for days or even months. Where this gas would be stored remains an open question, but NW Natural imagines a future where gas utilities' extensive pipeline holdings may one day allow them to compete against batteries and others solutions on bids for electric utilities' long-term storage needs.
"If we could be viewed in that same vein," said Anna Chittum, NW Natural's director of renewable resources, "I think there is an opportunity there for gas utilities."
"If [gas utilities] are not looking 20-40 years into the future, they will be left behind. It's an issue of, the world's changing, and you can either stand in place and watch it go by, or you can start jogging and catch up with it."
Spokesman, Eugene Water & Electric Board
Whether gas utilities would simply store that hydrogen or share it with residential customers remains an area of study at Southern California Gas Co., according to Neil Navin, SoCalGas vice president of clean energy solutions.
The gas utility is currently working on a "hydrogen home" pilot project that explores a potential hydrogen ecosystem where solar panels are used to drive electrolysis that generates hydrogen, which is then stored on site and used in a fuel cell and in appliances throughout the home. But Navin believes SoCalGas's main assets are its infrastructure and expertise, which are needed to both transport and store hydrogen.
And even if residential service doesn't pan out, Navin still sees a potential to serve industrial customers. High-heat manufacturing, chemical production and heavy transportation all require solutions hydrogen seems suited to offer. And someone's going to need to get it to them.
"We see traditional renewable energy players — solar and wind — as the entities that are very likely to engage in using excess capacity to produce hydrogen, and we see ourselves as the entity to move that hydrogen," Navin said. "Both to power plants that would generate electricity, but also to fuel cells, heavy transportation and ultimately to commercial and industrial clients."
This type of model might be particularly effective in multimodal hubs where renewable-focused electric utilities, gas utilities and high-intensity offtakers all exist in close geographic proximity, according to Michelle Detwiler, executive director of the Renewable Hydrogen Alliance.
"It's no secret that in order to move all that energy and get it from one place to another, the grid is going to need substantial upgrading and likely expansion," she said. "Right now, the most expensive part of producing hydrogen through electrolysis is the cost of power and the transportation."
Proximity and shared interests were both key factors in what ultimately brought EWEB and NW Natural to partner on an upcoming hydrogen pilot project. But one final factor sealed the deal, Harwood said: NW Natural took the initiative.
The project remains in its scoping stages, so the specifics have yet to be worked out. But for the time being, Harwood said, the project follows the model many in the gas sector have envisioned: EWEB plans to build and operate an electrolyzer in the 2-10 MW range, which it will use to split water into oxygen and hydrogen when EWEB has surplus renewable energy. EWEB will most likely sell the resulting hydrogen to NW Natural for injection into its natural gas system, where it will help the company meet its emissions targets.
With so many potential offtakers in the future, Harwood said it remains to be seen whether it will continue injecting hydrogen into the natural gas system long term. He said EWEB is particularly interested in selling hydrogen to other electric utilities for use in gas-burning turbines in regions where renewable energy is not as abundant as in Oregon, allowing them to more easily decarbonize.
"This is the foundation," he said. "Once the foundation has been poured and it's cured, we'll decide how to put up the walls."
This is the challenge of working in an emerging field such as renewable hydrogen, Detwiler said. There's a need for diverse stakeholders, but not everyone currently at the table is likely to find a permanent seat.
"Like the wind- and solar-sector industries, any time an industry is expanding and growing, you're going to have a lot of first-timers, a lot of people who jump in, and then the market just weeds them out naturally," Detwiler said. "A lot of startups are experimenting with technologies to produce hydrogen more cheaply. Some of them will be successful, some of them will fail. There is a very intense race to be the first folks who can make hydrogen for $1 per kilogram."
But if startups are the most acutely aware of the race, natural gas may face the greatest existential threat, Harwood said. Not because the competition between gas and electric companies has intensified, but because electric utilities can transition to a decarbonized economy with or without their gas-providing neighbors.
"If [gas utilities] are not looking 20-40 years into the future, they will be left behind," Harwood said. "It's an issue of, the world's changing, and you can either stand in place and watch it go by, or you can start jogging and catch up with it."