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Q&A: Turning natural gas into a renewable fuel

29 Jan 2018 19:19 GMT
Q&A: Turning natural gas into a renewable fuel

San Francisco, 29 January (Argus) — George Minter is the regional vice president for external affairs and environmental strategy for Southern California Gas (SoCal Gas), the largest natural gas distribution utility in the US. In this interview, edited for length and clarity, Minter talks about the need for a renewable natural gas standard similar to one applied to the state's electricity supply.

Can you talk a bit about what SoCal Gas has been doing with renewable natural gas?

The big-ticket item is that the California Public Utilities Commission approved the process for the biomethane dairy projects that are required under SB 1383. That is a bill that obligates utilities to put together at least five dairy pilots. Negotiations are occurring to put these pilots together. There is a lot of discussion about what needs to change in the way we do things to make these pilots work.

Describe SoCalGas' role in pipeline interconnection projects and how you see it evolving.

We ought to look at the way we did renewable electricity and what was the utilities' role. The utilities were able to generate renewable power, they built the transmission lines, and they delivered it to customers. We argue that we ought to be able to build the pipeline to interconnect with the customer — that would be a ratepayer responsibility, a ratepayer asset just like the transmission line on electric.

But we also argued that we ought to do the conditioning and the production if the dairy facility wants that to be done. In some cases, dairies are dairymen and they do not want to produce gas. In other cases, there are producing companies out there that are aggregating dairies and they will be the producer. There was some debate over who would own and operate the actual equipment. The determination is the dairy or the producer owns and operates the equipment, while the gas utility and its ratepayers pay for the pipeline infrastructure required to connect.

It is a big step forward and that sets the model for the future, particularly for pipeline interconnection.

You have said that we need to think about gas supply the way we think about electricity supply. Can you explain?

Like electricity, gas can be renewable, too. Thirty years ago, we had predominantly fossil fuel-generating assets, and over time they have become more and more renewable on the electricity side. There is a lot of renewable gas opportunity out there and there is no reason we cannot develop those renewable gas supplies.

Since we are looking at the utility industry, the gas industry really should look at the electric industry on how that was accomplished and what the rules were. We are arguing that we should all play by similar rules. The gas utility ought to be able to develop renewable gas supply; it ought to be able to invest in the infrastructure since it is achieving a public purpose objective just like the electrics were — that would be a rate-based asset with the costs spread across all ratepayers.

In fact, some people are saying it is time for a renewable gas portfolio standard. We have a renewable portfolio standard in law for electricity. Well, why just an RPS on the electric side? Clearly, more and more renewable gas is moving into the marketplace and we are going to need protocols established for procurement.

What sort of procurement policies are in place now?

The Air Resources Board has a requirement to achieve a 40pc reduction in short-lived climate pollutants, most of which are methane reductions. They are looking at how to prioritize the procurement of dairy methane, which turns out to be the largest single source of methane emissions into the California atmosphere.

Has SoCal Gas taken a position on a renewable natural gas standard?

There was language in SB100 when it was introduced by [state senator] Kevin de Leon last year that had provisions for a renewable gas standard. We thought that made sense.

The key issue is how do you do it, how do you validate it, and who pays the higher costs for renewable gas. It should be done in the same way we did electricity, which basically is, look, you are trying to achieve a social good, so you spread it across the ratepayers.

It got stripped out of the bill. We think that is too bad. Certainly that kind of language ought to move forward in legislation if we are really serious about renewable gas. We know the governor would like to decarbonize the gas supply.

What do you see as the future of renewable natural gas over the next 10 years?

The future is strong. Number one, the biomethane resource, which is the renewable gas resource that we are really focused in on in California, is a waste product going to the atmosphere. At the end of the day, we have to capture it and prevent it from going to the atmosphere because that methane is the same methane that is underground that we want to keep in the ground.

The market dynamic is strong, but it is also long-term. It is going to take a while for this new industry to really develop and for renewable gas to move into the marketplace because it is a higher-priced product. But particularly here in California, wastewater treatment operators and sanitation districts and landfill operators and now dairies, and I think some ag operators — they are all now really looking at capturing their methane and moving it to market.

That is the 10-year future. But we all recognize that the biomethane supply resource is limited. We have to develop other forms of renewable gas. After we get past 10 and 15 years out, we need to look at the technology — power-to-gas, electrolysis, methanation of renewable hydrogen. We are doing R&D projects on that.

What role does the state's Low-Carbon Fuel Standard (LCFS) play with renewable natural gas?

The LCFS provides an economic incentive to displace dirtier fuels with cleaner fuels, higher-carbon fuels with lower-carbon fuels. All of the CNG transportation uses are now becoming RNG. That is because the federal renewable tax incentive, combined with the LCFS incentive, now makes renewable gas on parity with fossil gas.

What do you see as the biggest factor impeding more renewable natural gas use in California? Is it pipeline interconnection restrictions? Are more government incentives needed?

There are two big issues. One is economics, and the other is politics.

The economic issues are just like renewable electricity. Solar and wind was more expensive than traditional electricity — that is true with natural gas. We have to address that economic reality. One of the ways is to require gas utilities, or all buyers in the marketplace, to purchase a certain percentage of renewable gas. That is what we did with electricity. It works. That is an approach that will work for gas.

The political issue is the will to continue the gas system. There are a lot of activists out there that are saying, 'We just have to get rid of gas. We just want to electrify everything. Everybody should just use electricity. It is clean, you cannot see it, it does not smell, it is not methane. Just stop using gas and start using electricity.' They are actually opposing renewable gas, which to me does not make sense.

Do you have any concerns that changes to the federal Renewable Fuels Standard could affect the future of the industry here in California?

Federal RINs are important to the renewable gas supply in California and nationwide. This first go-around suggests the Trump administration is not going to change that. That has a lot more to do with the agricultural industry's power and influence at the White House than it has to do with any concern about renewable energy. But nonetheless the continuation of the RINs credits is going to be important, and I think that will continue.