Natural Gas and Hydrogen Policy Needed

Looking only at the electrification required for natural gas replacement policy makers have these options:

• Ban current and future use of natural gas for space heating and cooking and a prepare phase-out and appliance replacement plan with consideration of need of electric distribution system enhancement.
• Ban only new natural gas hookups but continue service to existing customers until end of service life.
• Phase in hydrogen gas to replace natural gas in the existing distribution system. This would require the upgrade of existing facilitates and all new facilities must be built hydrogen capable.

The US central government does not have any plan for replacement of natural gas with electricity services. This is in contrast with the European Union (EU) which has announced plans to replace natural gas with hydrogen. New natural gas pipelines in the EU are to be built hydrogen compliant. While some US gas distribution companies are investigating their system’s capability to handle future hydrogen injection, not all are making such assessments. Whether states will allow for future hydrogen service is unclear at this time.

One contentious issue with hydrogen for many stakeholders is the source of the hydrogen. Unlike natural gas (methane) large supplies of naturally occurring hydrogen are not readily and widely available and thus hydrogen must be extracted for water or hydrocarbon. These various sources have been identified by the following “colors”:

• Green – produced by clean electricity via electrolysis of water
• Blue – from natural gas by steam reforming with carbon capture
• Grey – from natural gas without carbon capture
• Brown or Black – from coal or lignite
• Pink – from electrolysis of water via nuclear produced electricity
• Yellow – electrolysis from solar power
• White – naturally occurring deposits

This is widespread opposition to any sourcing of hydrogen from fossil fuels as the analysis is that such sourcing will extend natural, oil or coal production into the future. There is opposition, by some stakeholders, to any new use of nuclear power for any purpose including hydrogen production, based on various concerns including nuclear power plant safety; nuclear waste storage issues and proliferation of nuclear power plants leading to new nuclear bomb construction.

There has been some opposition to diverting electricity production from solar and wind generation to hydrogen production on the grounds that direct battery storage of electricity ma may be more economic.

Not yet widely apparent but it’s possible there will be opposition to hydrogen delivered to homes and business on the basis of public perception of the “safety” of hydrogen as a safety issue remembering the “Hindenburg” airship disaster.

One other factor to consider is that the energy density of hydrogen is less than 1/3 that of methane by volume meaning appliances and facilities must be able to handle much larger volumes for the same energy consumption.

The replacement of natural gas distribution services by electrification raises a number of questions with respect to the depreciation rates to be applied to existing and new facilities.

The following questions would need to be answered in utility rate proceedings:

• What is the new economic service life based on the new policy decision?
• What is the estimated cost of removal and salvage if service is terminated rather than old assts being retired and replaced?
• Are there stranded cost issues?
• How does a regulated utility recover “stranded costs” when there is no future customer service or revenue?
• Is the ban on future gas service as case of “stranded costs” or a case of violation of the “takings” clause.