Northwest Natural's Hydrogen Gamble

24 June 2024

Last month, northwest Oregon's natural gas utility company, Northwest Natural, announced a new partnership with a Seattle company, Modern Hydrogen. In a joint press release, the two firms unveiled a pilot project to use methane pyrolysis technology to generate hydrogen fuel, while capturing the carbon in the natural gas feedstock in solid form. The approach works by heating natural gas (99% methane; CH₄) to very high temperature in a reaction vessel that lacks oxygen, producing solid carbon (C) and hydrogen gas (H₂). With no oxygen present, the methane carbon cannot form carbon dioxide. Proponents of methane pyrolysis can thus fairly claim that their process is more climate friendly than the commonly used "steam reforming" approach, where natural gas is combined with water to generate large amounts of CO₂ along with the hydrogen (Earthward: 24 Aug 2023).

The pilot project is now operating at NWN's Central Portland facility in the inner Southeast neighborhood. In the news release, Modern Hydrogen CEO Tony Pan stated that this is the first time that methane pyrolysis has generated hydrogen for natural gas blending by a public utility. For his part, NWN CEO David Anderson envisions methane pyrolysis as a key part of the company's decarbonization efforts, complementing work at their Sherwood, Oregon test facility, where 15% hydrogen blending with natural gas was achieved last year. If hydrogen could be made cost effectively and at scale by methods that do not generate carbon dioxide, and then blended safely with natural gas in existing pipelines, it would offer a plausible way to reduce global warming impacts during the transition to a green energy economy no longer dependent on fossil fuels. 

Of course, those are some very big "ifs." Methane pyrolysis to produce so-called "turquoise hydrogen" is so far mainly the province of some small start-up firms (like Modern Hydrogen) that are exploring the method at a pilot scale. As with any new technology, it's important to critically analyze this approach for its potential costs and benefits. We should do our best to get clear on the details of precisely how the process works, how much carbon dioxide and other greenhouse gases are generated indirectly while running the operation, and what other pollutants may be emitted. We would also like to know the prospects for expanding to the industrial scale, and how the cost and energy efficiency compares to other hydrogen synthesis methods that are similarly touted as beneficial to a healthy climate. All of this is essential information for thinking about whether turquoise hydrogen should indeed be promoted, and, if so, what policies might be effective to accomplish this.

Lawmakers, NWN customers and healthy climate advocates who would like straightforward, properly critical information about turquoise hydrogen will not find it in a fawning KGW8 "news" piece aired on June 5. In that segment, an NWN employee confirms that hydrogen from the Central Portland facility is already getting blended into the system at a level of 0.2%. Another NWN representative, in a stunning display of misinformation, emphatically asserts that the solid carbon produced came "right out of the air" - a statement unchallenged by the KGW8 reporter at the production site. Viewers are thus led away from recognizing what would otherwise be more evident: the captured carbon is coming from natural gas drilled out of the ground, and not from the atmosphere. Turquoise hydrogen relies on fossil fuel, and the implications of this are crucial to any proper analysis of its value in the renewable energy transition.

As I've indicated above, the first thing to know about turquoise hydrogen is that it is the new kid on the block. The Oregon Department of Energy's report on Renewable Hydrogen in Oregon, which appeared a year and a half ago, describes a full rainbow of hydrogen synthesis approaches including green (electrolysis using renewably generated electricity), blue (methane feedstock with capture of CO₂), pink (electrolysis using electricity from nuclear fission), gray (methane feedstock without carbon capture [steam reforming]) and brown (lignite coal feedstock), but omits turquoise. More importantly, at the national level, not one of the seven regional Clean Hydrogen Hubs recently funded by the federal DOE emphasizes significant development of turquoise hydrogen. This is significant because the $8 billion allocated for these hubs is not likely to be augmented by similar levels of public funding anytime soon. Turquoise hydrogen development at industrial scale may thus have to rely more on private investment. However, four of the seven hubs (located in Appalachia, Texas, the Northern Great Plains and the Midwest) include blue hydrogen development from natural gas feedstocks. Plausibly, promising ventures in turquoise hydrogen may find ways to partner with these initiatives.

While both blue and turquoise hydrogen are generated from natural gas, the fate of the methane carbon is very different in the two processes. Blue hydrogen is made by the same steam reforming reaction that generates gray hydrogen, but with an additional carbon capture apparatus tacked on the end. The captured CO₂ may be sold for a variety of end uses, or generous tax credits from the Inflation Reduction Act may incentivize some manufacturers to inject the captured carbon into underground reservoirs. With turquoise hydrogen, the byproduct of pyrolysis is solid carbon, which is directly available and salable, avoiding the need to grapple with the complex technical and economic issues associated with carbon capture, including construction of a CO₂ pipeline network (Earthward: 7 Dec 2023). Injection of the captured CO₂ into geologic reservoirs is also complicated by a byzantine array of legal and regulatory hurdles, and the process is presently only cleared for use in a small number of states. I'll write more on this in a future Earthward post.

Significantly, a key commodity that can be made from the solid carbon is graphite, a universal component of EV and grid-scale lithium ion storage batteries. This does give methane pyrolysis some further imprimatur as a climate-friendly approach. In an insightful article, Forbes senior contributor Dipka Bhambhani reports on the potential that turquoise hydrogen has to capture a significant share of the US market for this crucial commodity. Graphite is a pure carbon material in which the carbon atoms are arranged in neatly packed hexagonal rings, a form crucial for its use in the batteries. Abundant naturally occurring graphite deposits exist in China and elsewhere, but are not found in the US. New tariffs against Chinese imports mean that US domestic battery production will have to rely more on synthetic graphite, so firms that can help meet escalating demands for hydrogen while also providing the raw material for graphite production should prosper. The Forbes article reports that the California startup C-Zero, recipient of a million dollar DOE grant and much private investment, is well positioned to use its turquoise hydrogen technology to exploit these market dynamics.

If turquoise hydrogen generates no CO₂ and also aids electrification, then where is the problem? Simply this: the feedstock required is fossil natural gas. Just drilling and refining natural gas already carries substantial social and environmental costs, but another major issue is that all parts of the production and delivery chain are prone to leakage. This is important because, over a 20 year timeframe, methane is 86-fold more potent than CO₂ as a greenhouse gas. For 2022, the Environmental Protection Agency estimates that methane emissions from the US oil and gas industry contributed the CO₂-equivalent of 220 million metric tons to global warming, nearly 3.5% of the total generated from all US emissions combined. Worse, there is good evidence that the EPA is significantly underestimating leakage rates. A recently published comprehensive aerial study of emissions from approximately one million individual sites showed that the actual measured leakage is three times higher than the EPA estimates. However, there is some good news. Reliable technology exists to sharply reduce leakage, so there are solid prospects for mitigating the problem - especially since the Nature paper also showed that 50-80% of the emissions come from under 2% of the emitting sites. New Biden EPA regulations limiting methane emissions from the oil and gas sector thus have good potential to be effective, especially since the industry has incentive to comply given that the leakage is imposing estimated annual costs of $1 billion in lost commercial value.

Let's return to NWN's Southeast Portland facility. It seems likely that the company has installed Modern Hydrogen's modular MH500 unit, which is able to produce 500 kilograms per day of H₂ from pipeline grade natural gas feedstock. The precise details of how this unit works are - unsurprisingly - not readily available, but methane pyrolysis (also called methane cracking) has been a well-known chemical engineering process for some time. The feed gas enters a high temperature, oxygen-free reactor chamber where the cracking reaction occurs, and the produced solid carbon particles entrained in the exiting stream of hydrogen gas are separated and purified. About 20% of the produced hydrogen can be recycled and burned to maintain the temperature in the reactor, and while this somewhat diminishes the yield it means that no external energy source is needed. Alternatively, the heat can be provided by electricity, which would have a carbon impact connected to the electricity power source (either the grid or a dedicated source, which could be renewable). The remainder of the H₂ is purified prior to sale or blending in a pipeline.

An October, 2023 review paper in the journal Chemical Engineering offers some useful comparisons with other hydrogen synthesis methods, and reviews the present state of turquoise hydrogen commercialization (surprisingly, Modern Hydrogen is not mentioned in the paper). One commercial scale plant is presently operating in Nebraska, and several others may come on line in the next few years. However, the industry is still at a very early stage, and a great deal of process optimization is still needed. Nonetheless, turquoise hydrogen requires far less energy input compared with green hydrogen (water electrolysis is very energy-demanding), though more than needed by the dominant "gray" approach. It seems plausible that turquoise hydrogen, though presently more costly, may soon surpass "blue" hydrogen in terms of costs and likely in terms of climate-friendliness - as carbon capture often traps only part of the CO₂ emissions, after which the issues of CO₂ transport and underground injection still need to be addressed. In contrast, turquoise hydrogen's climate impact could be quite low and may come mainly from the upstream methane leakage.

Despite these advantages, it seems unlikely that NWN's new investment in turquoise hydrogen will pay off. There are several reasons for this. First, the Pacific Northwest's federally funded hydrogen hub is concentrated entirely on green hydrogen. The infusion of funds and the developing partnerships among universities, nonprofits and private industry will provide enormous impetus in this direction. In contrast, fossil fuel mining is not a significant part of the region's economy, so that natural gas feedstocks would have to be brought in from out of state. But perhaps most important, the rollout of the federal hydrogen production tax credit will provide an enormous boost for renewable H₂ made by electrolysis. This green H₂ has so far not been competitive because of the high energy requirements and costs for the electrolysis equipment. However, analysis by Oregon's DOE shows that the cost of green hydrogen is expected to begin plummeting when federal guidance for the tax credit is fully available, which is expected soon. Smaller tax credits for turquoise hydrogen are also possible, but the details are very uncertain. It is likely that the turquoise approach will be better applied in other parts of the US, where the federal hydrogen hubs emphasize low-carbon hydrogen synthesis technologies that use natural gas feedstocks.

NWN is, unfortunately, out of step with the Pacific Northwest's emerging renewable energy economy, which is now well enshrined in the laws and regulations of both Oregon and Washington. NWN has led litigation against Oregon's Climate Protection Program, provided funds to a group advocating against building electrification, and now engaged in what may be a deliberate attempt to misinform the public about its turquoise hydrogen operations. Notwithstanding all this, the company has the power to choose a different approach. As I've written before (Earthward: 20 July 2023), Vermont Natural Gas offers a model of a natural gas utility that is choosing to reinvent itself as a company that offers energy solutions to its customers. NWN should follow suit. Its alternatives do not look good.

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Facts about Northwest Natural: https://www.nwnatural.com/about-us/the-company/overview

NWN/Modern Hydrogen announcement: https://ir.nwnaturalholdings.com/news/news-details/2024/NW-Natural-and-Modern-Hydrogen-Unveil-Clean-Hydrogen-Production-Carbon-Capture-Project-in-Portland/default.aspx

Lincoln County Leader article on NWN: https://www.newportnewstimes.com/business/modern-hydrogen-s-natural-gas-decarbonization-at-nw-natural/article_c8437090-84d8-11ee-bbf0-3f42f4b08f49.html

KGW8 video: https://www.kgw.com/video/news/local/good-energy/283-c3855a87-6f45-4f97-ae71-e5edbb121f74

Oregon DOE report on renewable hydrogen (Nov. 2022): https://www.oregon.gov/energy/Data-and-Reports/Documents/2022-ODOE-Renewable-Hydrogen-Report.pdf

Federally funded regional hydrogen hubs: https://www.energy.gov/oced/regional-clean-hydrogen-hubs-selections-award-negotiations

US national clean hydrogen roadmap: https://www.hydrogen.energy.gov/pdfs/us-national-clean-hydrogen-strategy-roadmap.pdf

International Energy Agency global H₂ review, 2023: https://www.iea.org/reports/global-hydrogen-review-2023

Legal morass for underground CO₂ injection: https://www.eenews.net/articles/why-injecting-co2-underground-is-a-legal-morass/

Forbes' turquoise hydrogen market dynamics: https://www.forbes.com/sites/dipkabhambhani/2023/11/01/turquoise-hydrogen-producers-could-capture-flourishing-graphite-market/#

Graphite's role in EV batteries: https://www.aquametals.com/recyclopedia/why-is-graphite-so-important-to-lib/

Explainer on natural gas delivery and storage: https://www.eia.gov/energyexplained/natural-gas/delivery-and-storage.php

EPA methane emissions estimates: https://www.epa.gov/natural-gas-star-program/estimates-methane-emissions-segment-united-states

Oil and gas industry methane emissions based on aerial data, Nature paper (behind paywall): https://www.nature.com/articles/s41586-024-07117-5

Oil and gas industry methane emissions based on aerial data, Stanford University analysis of Nature paper data: https://news.stanford.edu/stories/2024/03/methane-emissions-major-u-s-oil-gas-operations-higher-government-predictions#

Technology for methane leak abatement: https://www.iea.org/reports/global-methane-tracker-2023/strategies-to-reduce-emissions-from-oil-and-gas-operations#

Biden administration final EPA regulation on methane emissions (Dec. 2023): https://www.epa.gov/newsreleases/biden-harris-administration-finalizes-standards-slash-methane-pollution-combat-climate

Modern Hydrogen's modular hydrogen unit: https://modernhydrogen.com/solutions/mh500/

Technical overview of methane pyrolysis: https://modernhydrogen.com/wp-content/uploads/2023/11/Hydrogen-Production-via-Methane-Pyrolysis_-An-Overview-of-Turquoise-Hydrogen-Chemical-Engineering.pdf

Commercial progress on turquoise hydrogen (behind paywall): https://www.chemengonline.com/commercial-progress-on-turquoise-hydrogen/

Inflation Reduction Act H₂ production tax credit: https://foleyhoag.com/news-and-insights/publications/alerts-and-updates/2024/january/treasury-and-irs-propose-long-awaited-regulations-for-the-inflation-reduction-acts-hydrogen-product/

NWN's lawsuit against the Oregon Environmental Quality Commission: https://climatecasechart.com/case/lawsuits-challenging-oregons-climate-protection-program-rules/

NWN funding groups against building electrification: https://www.koin.com/news/oregon/nw-natural-contributes-nearly-1-million-to-eugene-residents-for-energy-choice/