With High Costs and Limited Supply, Renewable Natural Gas Will Not Meet Northwest Needs
While electric utilities in the Northwest have begun a transition to clean power, the gas utility sector has not yet begun to fully embrace a clean transition. Northwest gas utilities are promoting renewable natural gas (RNG) and hydrogen (see accompanying article) as broad decarbonization solutions for the gas system despite major challenges in supply, cost and carbon footprint.
RNG is methane gas from decomposing waste streams like landfills and manure lagoons. If technology matures, RNG might also be manufactured from woody biomass, using a thermal gasification process. There is a limited supply of these feedstocks, and at most, estimates suggest that the US would only be able to produce enough RNG to offset 15 percent of gas usage today, but studies show it could come at a five-fold cost increase and with a carbon footprint that is still 55 to 60 percent that of conventional natural gas.
With high costs and a limited supply, RNG will be directed to a small number of hard-to-decarbonize sectors such as certain industrial uses that require high heat and long-haul transportation modes, not for use in buildings. Yet, Northwest gas utilities are advertising RNG and hydrogen as the key strategies to achieve their statutory greenhouse gas requirements and to maintain current levels of gas sales. (Economy-wide emissions must be reduced by 95% and 80% from 1990 levels by 2050 in Washington and Oregon, respectively.) To do this, gas utilities are proposing solutions that result in high costs for consumers and could lead to stranded assets.
NW Natural’s proposed RNG strategy grows its customer base by more than 36 percent by 2050. However, to offset emissions from this customer growth and to still comply with Oregon’s climate regulations, NW Natural projects that gas sales volumes would need to drop by 36 percent and that 72 percent of its deliveries would need to come from RNG, hydrogen, and synthetic methane by 2050. PSE has disclosed fewer details on its strategy to decarbonize but has indicated it will lean heavily on RNG to mitigate emissions.
To achieve these goals, both NW Natural and PSE would have to acquire significant volumes of RNG and hydrogen. To date NW Natural has only acquired renewable thermal credits1 from RNG for less than 2 percent of its customers’ gas demand, all from out-of-state sources and ineligible for credit under Oregon’s Climate Protection Program (CPP) rules. PSE has acquired even less: 0.5 percent of total gas volumes. While utilities have not disclosed the prices that they paid for their RNG resources, NW Natural estimates the alternative gas costs $16.63/MMBTU on average, which is approximately five times more expensive than natural gas derived from fossil fuels.
RNG volumes are projected to displace only a small portion of gas demand today, so gas utilities will also need to drastically cut customer demand to meet their decarbonization goals. NW Natural’s main strategy to do so is with energy efficiency, but its plan is questionable. The utility is projecting to increase residential energy efficiency programs to a level well beyond what experts estimate is technically possible— 36 times the gas saved over its 2021 energy efficiency results and a 2,000 percent increase over 2021 conservation spending starting in 2025. In this scenario, gas-powered heat pumps must make up 25 percent of the heating equipment market by 2025 though this technology is not yet commercially available.
The region’s gas utilities lack credible emissions reduction plans. In lieu of shifting their business models, gas utilities are instead turning to the courts in an effort to overturn and repeal emissions regulations. NW Natural has joined a lawsuit to sue Oregon to repeal the CPP. PSE deployed a similar litigation strategy to avoid emissions regulation with the Clean Air Rule in Washington. Voiding emissions regulation with lawsuits is an unlikely outcome, and so too is maintaining business-as-usual for corporations dealing in fossil fuels.
