Takeaways
- Oregon’s largest gas utility, NW Natural, has started injecting hydrogen into its natural gas distribution lines without informing customers or regulators.
- Hydrogen is risky for consumers and a distraction from more effective and cost-efficient decarbonization approaches, especially electrification.
- But Oregon, like most jurisdictions in Cascadia, lacks any laws to protect customers from hydrogen blending projects. Cascadian policymakers would be smart to act quickly and fill the gaps.
Find audio versions of Sightline articles on any of your favorite podcast platforms, including Spotify, YouTube, and Apple.
Customers in southeast Portland recently found out that hydrogen may be sneaking its way into their homes. NW Natural, Oregon’s largest gas utility, has started injecting hydrogen, blended with so-called “natural gas,” into its distribution lines without informing customers or regulators.1
Hydrogen is a bad bet for decarbonizing homes pretty much any way you look at it. It’s far more expensive than electrification, can’t achieve nearly the same climate impact, and can be dangerous, as Sightline has written about extensively. Plus, since carbon-free green hydrogen is in short supply and is electricity-intensive to produce, policymakers would be smart to save it for the hardest-to-decarbonize sectors, like heavy industry.
But gas utilities across Cascadia are pushing hydrogen for use in homes and businesses, and lawmakers and regulators have yet to catch up. Oregon, home to Cascadia’s first hydrogen-blending pilot, has no laws to protect consumers and communities from ineffective, unsafe, and inefficient use of the fuel.
And Oregon is not alone in the region; Alaska, Idaho, and Montana all lack legal oversight of hydrogen blending, although no projects of this type are yet underway in these states. (British Columbia statute permits gas utilities to replace some of its natural gas with hydrogen, subject to price and quantity caps.) Washington State is the only jurisdiction in Cascadia with some safeguards for consumers, communities, and the electric grid around utilities’ use of hydrogen. Policymakers in Oregon and Cascadia writ large can build from Washington’s policy to protect customers and ensure that gas utilities aren’t throwing good money after bad.
Cascadia’s first hydrogen blending project is underway
All Cascadian gas utilities promote hydrogen as a pivotal part of their decarbonization plans. Hydrogen and biomethane feature prominently in NW Natural’s 2022 integrated resource plan (IRP).2 Oregon regulators recently rejected this plan, partly because its long-range assumptions about hydrogen “skew optimistic” and do not present an “objective view of the significant risks and uncertainties” of the fuel. In fact, the Oregon Public Utilities Commission (PUC) rejected all three of the state’s gas utilities’ plans to decarbonize with hydrogen due in part to high cost and overly optimistic forecasts for growth of a hydrogen economy.
In December 2023, NW Natural started delivering hydrogen to homes and businesses in the Portland area without formal notice to regulators or customers.
But this regulatory setback didn’t stop NW Natural from moving ahead with the fuel. “Hydrogen is a key piece of our plan to reach our goal of delivering carbon neutral energy by 2050,” NW Natural boasts on its website. In December 2023, the utility started delivering hydrogen to homes and businesses in the Portland area without formal notice to regulators or customers. The pilot is displacing just 0.2 percent of summer gas volumes and 0.003 percent of winter gas volumes.
Cascadia’s gas utilities have promoted so-called green hydrogen, made from renewable electricity-powered electrolyzers that split water into hydrogen and oxygen. (See Sightline’s primer on the different types of hydrogen.) But NW Natural isn’t even piloting green hydrogen; it is blending turquoise hydrogen into its system, which it produces at its Central Portland facility. To create turquoise hydrogen, natural gas is heated to high temperatures and converted to hydrogen and solid carbon—a process known as pyrolysis. Climate-warming pollution is emitted throughout the process: methane leaks during fracking and delivery, and fossil fuels may be burned to generate heat for pyrolysis.
Even if NW Natural were using green hydrogen, its pilot would skim less than 0.07 percent of carbon emissions from NW Natural’s gas system
Even if NW Natural were using green hydrogen, its pilot would skim less than 0.07 percent of carbon emissions from NW Natural’s gas system.3 And if NW Natural scales its hydrogen operations to displace 20 percent of its gas blend (a hundredfold increase from the pilot and the maximum possible blend amount in existing pipelines), it would still reduce its carbon emissions by at most 7 percent.
Oregon lawmakers can safeguard communities and the climate from hydrogen’s risks
In 2022 Washington became the first place in Cascadia to require that a gas company show, in advance of hydrogen blending, that it has hydrogen-specific safety standards, that hydrogen production will not adversely impact the electric grid’s reliability, and that hydrogen production is consistent with the utility’s integrated resource plan. No gas company in the state has yet put the law to the test.
The rest of the region, however, lacks regulatory safeguards for hydrogen blending projects by gas utilities. Lawmakers in Oregon, home to Cascadia’s first hydrogen blending pilot, would be especially smart to act quickly to close the gap in state law.
At a minimum, policymakers could require utilities to give regulators and customers advance notice of the intent to replace natural gas with hydrogen. Even better, though, would be for lawmakers to require utilities to include the following five components in a notice to regulators. (Washington law already includes the first three components, but lawmakers could strengthen state statute by requiring utilities to conduct life-cycle emissions analyses of hydrogen blending and compare hydrogen blending to electrification alternatives.)
1. Robust hydrogen-specific standards.
Hydrogen behaves differently in pipelines than natural gas. The molecule is smaller, lighter, and more flammable. Natural gas appliances and pipelines weren’t designed with hydrogen in mind.
Utilities should demonstrate that they have standards and specifications for producing and transporting hydrogen blends as well as for metering, leak detection, emergency response protocols, and compatibility with customer-owned equipment and piping.
2. Assessment of impact on the electric grid.
Green hydrogen has been the most prominently discussed hydrogen manufacturing method for decarbonization. But green hydrogen takes a tremendous amount of renewable electricity to produce. For many purposes such as home heating, hydrogen is a woefully inefficient alternative to direct electrification. The Northwest already faces a formidable challenge to installing enough renewable electricity and bolstering its electric grid to meet rising electricity demand. Diverting renewable resources to produce green hydrogen, if done without careful integration, could destabilize the grid and set back decarbonization progress in other sectors, such as transportation and buildings.
Thanks to Ross Chapin & Deborah Koff-Chapin for supporting a sustainable Cascadia.
Our work is made possible by the generosity of people like you.
Gas utilities should provide a full assessment of the impacts to the electric grid from the manufacture of hydrogen. This assessment would demonstrate that hydrogen production is not detracting from resource adequacy in the region.
3. Consistency with an acknowledged resource plan.
Every two years, gas utilities must file an IRP with regulators that analyzes future supply and demand across a range of plausible scenarios. These plans evaluate the costs of various approaches to meeting future resource needs and set the stage for future resource acquisitions. Utilities should show that hydrogen projects are consistent with utility resource plans that regulators have already acknowledged.4
4. Consistency with state decarbonization goals.
Hydrogen can be made in myriad ways, and not all are low carbon. With NW Natural already manufacturing turquoise hydrogen from natural gas through methane pyrolysis, Oregon lawmakers should ask utilities for a full life-cycle emissions accounting of their hydrogen proposals to show alignment with state emissions reduction targets.
5. Cost-effectiveness relative to other decarbonization approaches.
Utilities should provide an analysis of the carbon reduction benefits of injecting hydrogen blends into pipelines compared to alternatives such as electrification. Hydrogen is much less effective at decarbonizing buildings than electricity. Only small volumes of hydrogen (perhaps up to a ratio of 20 percent hydrogen to 80 percent natural gas) can safely be injected into existing gas pipelines. But a 20 percent blend of hydrogen shaves off only around 7 percent of the combustion emissions of a system running on 100 percent natural gas.
Gas utilities are diverging from state climate goals; hydrogen is part of the reason
Alternative fuels such as hydrogen distract utilities from more impactful decarbonization approaches, most importantly electrification. In the years since NW Natural started touting its alternative fuels strategy, the utility has put little effort into examining electrification as anything but a threat, even though alternative business models such as thermal energy networks could make electrification profitable for the utility.
NW Natural did not model electrification as a way to comply with Oregon’s landmark Climate Protection Program (CPP). Likewise, in its 2022 IRP, the utility did not analyze stand-alone electrification—only hybrid electric heat pumps with natural gas furnaces, which would lock in customer dependence on the gas pipeline system. And only after stakeholders balked at the omission of electrification from utilities’ decarbonization strategies within the PUC-led natural gas fact-finding workshops did NW Natural make a halfhearted effort to model electrification. Even so, the utility omitted key analyses, including a comparison of consumer costs for electrification versus decarbonization with hydrogen and other alternative fuels.5
But alternative fuels aren’t delivering results commensurate with Oregon’s decarbonization goals. By the end of 2023, NW Natural had replaced less than 1 percent of its delivered natural gas with alternative fuel sources (specifically biomethane). Its 2024 hydrogen pilot won’t move the needle on this statistic. And the utility’s greenhouse gas emissions have trended upward since 2010, as the figure below shows.
As NW Natural doubles down on alternative fuels with its hydrogen pilot, it is continuing on the same pathway that has thus far borne lackluster results, amplifying the need for additional oversight.
Regulators are already questioning the viability of alternative fuels such as hydrogen to meet the state’s decarbonization goals. Empowering the PUC to examine hydrogen holistically before utilities invest in and inject it into the pipeline will protect ratepayers and communities from ill-considered pursuits.
Hydrogen oversight is needed before gas consumers pay the price
Utilities are experimenting with hydrogen blending as a residential decarbonization strategy. But regulation and oversight of the use of the gas lags and is sorely needed to ensure that efforts to use the gas achieve broader societal goals. Washington recognized the need for some regulatory oversight of hydrogen blending and production when it passed its 2022 law. But Oregon, where NW Natural is already piloting the fuel in people’s homes, has not established any guardrails on hydrogen blending. Oregon lawmakers can catch up and install boundaries to protect consumers and communities from ineffective, unsafe, and inefficient use of this alternative fuel.
