Green Gas: A Leapfrog Opportunity for a New Low-Carbon Industry
Anyone who follows global energy markets knows about the rapidly growing interest in green gases — including green hydrogen and sustainable biogas — to accelerate decarbonization efforts. For context, earlier this year, the European Union set ambitious targets for green hydrogen with the aim of installing 40 gigawatts of electrolyzers within its borders by 2030 and plans to support the expansion of sustainable biogas production. In late November, New York-based Plug Power raised more than $1B for a U.S. green hydrogen infrastructure buildout, including an electrolyzer gigafactory. Airbus is betting on green hydrogen to reduce aviation emissions. Even oil giant Saudi Arabia is now making big plans for green hydrogen.
Industry analysts are bullish on the potential for green gases because these products are expected to help decarbonize industry segments that are harder to electrify, such as shipping, aviation, and heavy industry. Case in point: PwC estimates that green hydrogen will displace about 37% of pre-COVID-19 global oil production by 2050 and World Resources Institute research suggests that biogas could replace 15% of all diesel consumed by heavy-duty trucks and buses in the U.S.
Like the green electricity sector before it, this rapidly growing industry will need to coalesce around an agreed-upon method for tracking and tracing green gases. We see two primary paths: 1) Follow precedent set by the renewable electricity space over the past 20 years to track and trace green attributes, or 2) Leapfrog legacy methods by jumping straight to a global, open-source, digital-first architecture for green gases—unlocking significant business and carbon value along the way.
A familiar challenge from renewable electricity markets: tracking green attributes
Similar to global markets for renewably-generated electricity — which includes a variety of energy attribute certificates (EACs for short), such as guarantees of origin in Europe, renewable energy certificates in the United States, and international renewables energy certificates (I-RECs) in 35+ developing countries — green hydrogen and sustainable biogas markets will ultimately require an agreed-upon accounting system to prove just how low-carbon each unit of green gas is.
Like renewable electrons joining the generic generation mix of a power grid, green gases become ‘invisible’ once they flow — metaphorically and literally — into the fuel mix. Renewable electricity markets and green gas markets both face the challenge of retaining specialized, differentiated information in what used to be pure commodity markets. EACs provide a critical instrument for tagging the environmental attributes of these specialized products, distinguishing them from non-renewable electricity and hydrocarbon fuel sources, and tracking progress toward policy targets and voluntary sustainability goals alike.
In practice, EACs operate as a de facto voluntary market subsidy because companies must obtain and claim EACs to prove the impacts of their renewable electricity and green gas procurement. So, for example, companies like Airbus will depend on green gas EACs to prove the sustainable attributes of their fuel use in a credible way.
The green gas conundrum: copy proven yet imperfect renewable electricity markets or chart a leapfrog path to pure digitalization
Putting aside the various open questions around EAC market design, standards, and regulations specifically for green gases, there are two main routes available for implementing and managing green gas EAC markets:
- Copy the combined use of closed, siloed, legacy business and software processes from existing EAC markets, where: each EAC issuing body operates a national EAC registry that most of the time is not interoperable with other markets or countries; market participants go through registration and issuance processes that are at times manual and cumbersome; and where third-party companies facilitate trades between EAC buyers and sellers and update EAC issuer systems based on completed trades.
- Take a fully integrated, digital-first approach from the outset, where: all green gas facilities, registries, and marketplaces share an open-source, underlying digital infrastructure to unlock seamless integrations with any current or future regulatory standard — enabling direct green gas EAC trading, greater market transparency, and reduced administrative costs.
Given vast digitization efforts and growing digitization investments under way across the energy sector, we at Energy Web encourage market participants to prioritize a digital-first approach during this nascent time for green gas markets. We believe such an approach will help green gas markets avoid repeating the pain points of renewable electricity markets and better meet clean energy buyers’ needs from day one.
How an open-source, open-architecture tech stack could support green gas markets
To develop digital solutions for green gases, market participants can take advantage of multiple collaborative technology development efforts already under way. Using open-source standards and technologies such as decentralized identifiers paired with blockchain technology, we can deploy an interoperable digital infrastructure that makes it possible for any trusted asset (e.g., an electrolyzer or fuel refinery), customer, and organization (e.g., regulatory bodies) to seamlessly participate in the market for green gases.
In the case of green gases, such an approach leapfrogs digital solutions by:
- Simplifying the registration and identity management process of green gas facilities and market participants through the use of decentralized identifiers that make it easier to track and find key details about green gas facilities;
- Streamlining verified green gas production tracking, trading, and environmental reporting by digitizing each part of green gas EAC issuance, trading, and cancellation lifecycle with robust, accessible audit trails (for an example, various applications in the electricity sector use this approach via the open-source Origin toolkit); and
- Enabling a global market for green gas procurement through emerging renewables buyers tools like Energy Web Zero, where green gas sellers can directly post EAC supplies and sell directly to buyers.
For a deeper dive into Energy Web’s perspective on the role of digitization and decentralized technologies in green gas markets, please review our contribution to the recently published investigative Renewable Gas Trade Centre in Europe (REGATRACE) study of IT system options for EU green gas markets.
On our side, Energy Web is hosting conversations with market participants, including various Energy Web Members, to clarify what features should be added to our technology roadmap in order to address the technical and business requirements of digitized green gas solutions. If you are interested in learning more about this work or providing feedback, please contact Doug Miller (doug.miller@energyweb.org) and Meerim Ruslanova (meerim.ruslanova@energyweb.org).
