How to keep worrying but still learn to love natural gas
Or: Don’t be a climate hipster. Be a fugitive emissions hawk.
by Andy Lubershane, SVP Strategy @ Energy Impact Partners
(but the opinions published herein are my own)
From Wikipedia (accessed 8/18/21):
“The 21st century hipster is a subculture that is defined by claims to authenticity and uniqueness yet, ironically, is notably lacking in authenticity and conforms to a collective style.”
I’ll return to this concept in a bit.
If natural gas is going to be a “bridge fuel”, the bridge needs to be short…and an actual bridge
In the past twenty years, natural gas has often been heralded as the ideal “bridge fuel”. Here’s why:
- Burning natural gas to produce energy releases about half as much carbon dioxide into the atmosphere as burning coal for energy.
- In many sectors — though not all — natural gas is a relatively straightforward substitute for coal.
- In North America, natural gas has become dirt cheap, thanks to the development of hydraulic fracturing (i.e. “fracking”) technology and associated infrastructure. It’s still about two times cheaper to burn North American natural gas to produce high temperature heat — which is what the majority of energy is used to do — than to produce heat from even the cheapest wind & solar power.
- Hence, substituting natural gas for coal appears to be an affordable way to reduce greenhouse gas emissions while renewables scale up to supply the majority of our energy — perhaps nearly all of our energy — over the next 2–3 decades. In this way, natural gas can serve as the “bridge” to a clean energy future.
This is the “bridge fuel” narrative. At first glance, it appears to be coming true:
So what’s the problem?
There are two big ones. Both are deal-breakers for natural gas if they’re not overcome, but neither is insurmountable.
First: The bridge we’re building might be too long: We’re in a climate emergency, and those who recognize that fact are rightfully concerned that new investment in natural gas infrastructure — from pipelines, to power plants, to home heating systems — will lock us financially into a much longer “bridge” than the climate will tolerate. The typical gas infrastructure investment has a 25–30 year financial lifespan. If those assets continue to emit carbon at a level anywhere near their full carbon-emitting capacity over that timeframe, then I won’t be able to look my kids in the eyes and tell them “You won’t get cooked”.
Second: The bridge we’re building isn’t really a bridge at all: It’s true that natural gas — when it’s burned — releases just a little more than half of the carbon dioxide as coal, when it’s burned. But, not all of the natural gas we unearth is burned. A well-regarded estimate from the Environmental Defense Fund pegs the total amount of “fugitive” natural gas leakage at about 2.4% of all the gas we pump out of the ground. Unfortunately, that measly 2.4% ruins natural gas’s carbon profile. That’s because natural gas — methane — is itself a greenhouse gas which is far more potent than the carbon dioxide emitted when it’s burned. Methane is especially potent in the first couple decades of its existence in the atmosphere.
Growing awareness of these two problems has shaken the foundation of the bridge fuel narrative. In its place, a “renewables only” narrative and an “electrify everything” narrative have taken hold of a growing share of the climate & energy community. These narratives are beginning to exert political power — leading to both subtle & not-so-subtle decisions that restrict new investment in natural gas infrastructure and consumption.
Narratives have a way of building on themselves. There’s a chance that natural gas infrastructure gets sucked into a kind of “death spiral” — the kind of negative feedback loop that was once prophesized for electric utilities due to the falling cost of rooftop solar. In fact, it’s turned out that cheap solar (mostly large-scale, not rooftop) has been an incredible boon for the electric infrastructure business, and has positioned electric utilities at the center of the energy transition. Actually, the “solar death spiral” has become a much more realistic threat to natural gas.
This, too, is just a narrative. The future of natural gas is no more set in stone than gas itself, which can be set loose from porous rock with the right application of pressure.
I repeat: we’re in a climate emergency. We can’t afford to be ‘climate hipsters’ who reject a cheap, abundant, rapidly scalable resource with robust, continent-spanning delivery networks in place…just because renewable electricity feels more authentically green.
Hence, the natural gas industry needs to face it’s glaring weaknesses head on, at least in order to shore up the bridge fuel narrative, and perhaps even more importantly: because natural gas might be more than a bridge. I’m convinced that it’s way to soon to give up on the optionality that natural-gas-centric approaches to decarbonization provide.
More on that in a bit, but first…
First, shoring up the bridge
In general: Beware articles that tout “one easy step” to fix anything.
In this particular case, though, there actually is one easy step that natural gas producers, pipeline operators, and consumers can take to fix the foundation of the bridge fuel narrative. This one easy step also happens to be extremely low-cost: Become a fugitive emissions hawk.
The 2.4% of gas that leaks along the way from wellheads to consumers is by no means impossible, or even all that expensive, to prevent from leaking. The industry simply hasn’t had enough incentive to prioritize doing so.
We have a pretty darn good idea which link in the natural gas supply chain is responsible for most of the leaks. A landmark EDF study estimates that three quarters of ‘fugitive’ emissions come from wellheads themselves or from local gathering & processing equipment — in other words: it’s the gas producers, ultimately, who’ll need to take action to stop the lion’s share of emissions.
We also know that producers vary tremendously in their self-reported emissions rates — and most producers report very low emissions. The top 50% of producers emit less than a tenth as much as the worst performers!
It’s possible that poorly performing producers might decide to shape up on their own. Hopefully they’ll realize that they’re at risk of getting caught in a death spiral, and they’ll elevate the hunt for fugitive emissions to the level of existential priority that it deserves.
For now, though, producers apparently still need a firm nudge in the right direction by their customers. Large natural gas buyers like electric utilities (who burn gas to run their turbines), gas distribution utilities, and other large industrial gas consumers need to appreciate that their social license to operate is also at risk. They, too, must contend with the threat of a death spiral.
Many electric utilities have now publicly committed to high levels of carbon reduction in the 2030–2050 timeframe. For most, natural gas remains an essential element of those plans. Large gas buyers are especially well positioned to demand that their gas suppliers clear a very high bar on fugitive emissions — and prove it. My firm, EIP, has invested in a company called Project Canary, which has developed a proprietary sensing & analytics suite — along with a certification system — to do just that. Project Canary estimates that a typical gas utility could purchase certified “responsible” gas for its customers for an average cost of about $1 per customer per year.
The most difficult challenge for utilities seeking to purchase certified “responsible” gas is unlikely to come from internal opposition. Instead, it’s likely to come from policymakers and regulators. In some states, regulators may feel their hands are tied from approving any increase in energy cost, no matter how negligible, in the name of climate change. In others, regulators may feel increasingly hamstrung by climate hipsters who perceive even responsible gas —despite being such an obvious win for the climate — as an impediment to their preferred decarbonization narrative.
I believe both ‘red’ and ‘blue’ objections to responsible natural gas can & should be overcome. In part, they can be overcome by the same argument:
Natural gas might be more than a bridge.
Really, natural gas might be more than a bridge!
If fugitive emissions are dealt with, then we can safely explore two credible technology pathways which would enable natural gas to play a significant role in a fully decarbonized energy system, well beyond 2050. Both, unsurprisingly, require a form of what’s called “carbon capture & storage”, or CCS.
The only difference between these pathways is that one relies on ‘post-combustion’ carbon capture, and the other on ‘pre-combustion’ capture.
Post-combustion capture is what most people think of as CCS. Essentially: burn the gas, then suck out as much of the CO2 as you can from the emissions flue — typically with a solvent or a sorbent-based chemical approach — then stick that CO2 in a pipeline and pipe it to a geological formation where it can be pumped underground for, effectively, the rest of time.
There’s no new technological wizardry needed to make this process work. All of the technology has been fairly well proven by large industrial incumbents, and geological storage capacity has been fairly well studied. But this pathway is still highly uncertain. The challenges are twofold:
- The more of the carbon you want to capture from an industrial flue, the more expensive it becomes. Getting to absolute zero carbon is practically impossible.
- In general, CO2 transport & storage infrastructure cannot be built up cost effectively on a facility-by-facility basis. To achieve economic viability, that infrastructure will need to be developed much like pipeline infrastructure today —to serve a regional or even national network of carbon capturers.
Pre-combustion capture is typically referred to by the nicknames for it’s output: “blue” or “turquoise” hydrogen. In both cases, methane is converted to hydrogen and a carbon byproduct. In conventional hydrogen production, a process called steam methane reformation, that byproduct is CO2. If the CO2 is captured and piped to a sequestration site just like in the scenario above, the resulting hydrogen is “blue”. If the carbon-based byproduct is instead solid carbon — ready to be either or landfilled or put to use as a feedstock for various products — the resulting hydrogen is called “turquoise”. (Most turquoise approaches can make use of some amount of ‘green’ electricity as a secondary energy input alongside natural gas — hence the blue/green color scheme.)
Whether capture is done pre or post-combustion, early indicators suggest that ‘clean natural gas’ could be very cost-effective. The most promising early-stage technology developers in each category believe that they can deliver dramatically lower-carbon energy and compete well economically against both “green” electricity & its derivative “green” hydrogen. There’s no doubt that these ‘pure green’ decarbonization pathways will have a big role to play in areas with superb wind & solar resources. But natural-gas-centric pathways are shaping up to be strong contenders in regions with more expensive renewable resources, like the densely populated east coast of the US.
That is, of course, if we deal with the fugitive emissions problem. If not, studies show that these pathways aren’t worth pursuing.
Getting to the other side of the bridge
I’ll repeat once more: We’re in a climate emergency. It’s too soon to rule out natural gas as a potential solution. Instead, the goal of climate activists, clean tech investors, and industry strategists alike should be to direct society towards the highest & best use of such a plentiful resource. If you agree, here are the steps forward I’d recommend:
I. For starters, an intense focus on fugitive gas emissions would reduce emissions right now! This is a must-do, because there’s no scenario in which we’re not pumping gas out of the ground, to at least some extent, for the next 30 years. Gas producers: If you ignore this risk, it’s your funeral. Gas buyers: It’s time to encourage your vendors to do the right thing. Next time you go to market for gas, demand at least a portion of it is certified by a trusted-third-party to be near-zero fugitive emissions.
II. To anyone in the gas infrastructure business: When you’re considering an investment in the next pipeline, power plant, or industrial furnace, make a plan to future proof it for decarbonization. Generally, speaking, that’s going to mean making it as “hydrogen-ready” as possible. It’s too soon to say whether that hydrogen will be green, blue, or some other color. My best guess is that the specific hue of hydrogen will vary from plant to plant depending on lots of site-specific variables. (In some plants, direct electrification will also be an attractive option…but that’s a tale for another day…)
Technology is on track to make the NG → H2 transition possible for a wide range of applications. For example, the three largest manufacturers of natural gas combustion turbines — GE, Siemens, and Mitsubishi — each offer modest hydrogen-cofiring options today, and plan to launch 100% hydrogen-ready turbine models by 2030. Utilities and independent power producers around the world are already beginning to realize the importance of the optionality that this technology offers.
Over time, natural gas assets will almost certainly burn less & less gas directly. Some will co-fire increasing levels of hydrogen. Others will simply run much less frequently, but provide outsized value to the energy system in the form of fuel diversity & resiliency. For example, the gas-based microgrids developed by Enchanted Rock (also an EIP portfolio company) are a quintessential case study in wringing the most resiliency value out of a relatively small amount of gas consumption. Over time, this type of distributed gas generation can also be transitioned to run on either hydrogen or renewable natural gas (a topic for another day).
To other interested readers: Don’t be a climate hipster. Be a fugitive emissions hawk! And please tell your politicians & regulators to do the same.
Stray notes:
- Apologies to hipsters (sorta). No really, some of my best friends were hipsters in college!
- Yes, my firm stands to profit from Project Canary’s success. I’d evangelize for them even if it cost me personally. I believe they’re doing some of the most important work in the energy industry today. Rarely in the clean tech world does one encounter such a slam-dunk value proposition.
- GHG emissions aren’t the only negative impact of natural gas production that need to be minimized. The industry still needs hawks watching out for conventional air & water pollution, too. However, it’s important to note that natural gas is not alone among energy sources in requiring careful management to avoid local environmental harm. Wind & solar power also come with serious land-use & environmental downsides that are much easier to dismiss today than they will be at net-zero scale.
