Catalyst with Shayle Kann - The future of natural gas

Episode Date: December 9, 2021

There are many pathways to decarbonize natural gas. Do we replace it, full stop? If so, with what? Or do we blend natural gas with alternatives, or rip up the old infrastructure and replace it with something new?  There's a lot to unpack here. But also a lot of opportunities for innovators in the climatetech world. To dig into it, Shayle turns to Andy Lubershane, the senior vice president for research & strategy at Energy Impact Partners. Andy and Shayle talk about natural gas’ existential threat: upstream methane emissions.  And remember the utility death spiral? Andy argues that, if solar and DERs continue on their current rise, natural gas infrastructure might actually face a death spiral itself. They talk about capturing methane emissions, replacing gas with hydrogen, recovering solid carbon, and renewable natural gas. And where might natural gas stay strong? Andy says to keep an eye on distribution-level building heat.  Catalyst is a co-production of Post Script Media and Canary Media. Catalyst is supported by Atmos Financial. Atmos offers FDIC-insured checking and savings accounts that only invest in climate-positive assets like renewables, green construction and regenerative agriculture. Modern banking for climate-conscious people. Get an account in minutes at joinatmos.com.

from the studios of PostScript Media and Canary Media. I'm Shail Khan, and this is Catalyst. It's really hard to get rid of natural gas in the kind of timeline that I think some of the, as you call them, purists, as I've referred to before, as kind of the climate hipster viewpoint, would have us do. Good, comprehensive conversation about the future of natural gas under deep decarbonization should include the following phrases.

methane leakage, electrification, hydrogen, green, blue, turquoise, maybe even red, carbon capture, co-firing pipelines, renewable natural gas, which is all to say it's complicated. Let's give it a shot. When utilities need flexible capacity they can count on, they turn to Energy Hub. Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices to manage 3.4 gigawatts of flexibility, built for the moments when utilities can, can't afford uncertainty. Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on, coordinating EVs, batteries, thermostats, and more

through a single platform built for utility scale. Predictive, verifiable, and designed to perform when it counts. Learn more at energy hub.com. I'm Shail Khan. I'm a partner at the venture capital firm, energy impact partners. Welcome to Catalyst. Okay, so let's start with the most important premise here, we need to reach net zero greenhouse gas emissions economy-wide by mid-century or earlier. Full stop. In that context, there are some obvious cascading effects. Coal, as used in power generation and steelmaking, for example, will almost certainly need to sunset and sooner than later. Same goes for petroleum for passenger vehicles. But the one that's most nuanced, at least in my mind is natural gas. First of all, natural gas is more versatile than you might think. It's about

a third of our primary energy production overall, but its uses are split. In the U.S., for example, as of 2020, we used 38% of our natural gas in the power sector, 33% directly in the industrial sector, 25% in buildings, mostly for heating. So any discussion of the future of natural gas needs to look comprehensively at all of these sectors. There's a lot of conversation. There's a lot of conversation about removing natural gas or displacing natural gas, for example, in power that if you did it entirely would get you 38% of the way there. Then there are many pathways to decarbonize. Do we replace natural gas full stop? If so, with what? Electricity or other gase fuels like hydrogen. What impact does that have on the natural gas infrastructure that we've

collectively spent billions of dollars on? Is there a blending approach at first or is it a rip and replace. And if we're talking about electrification, how much new power demand are we talking about? What strain does that put then on land use, on the grid, and so on? Not to mention, how do we decarbonize industry, which sometimes uses natural gas to generate extremely high temperatures that are difficult to electrify? So there's a lot to unpack here, but let me say this. Because natural gas is such a huge part of our energy and our emissions mix today, it also presents a huge opportunity for innovators in climate tech world, whether by finding replacements or by decarbonizing the existing infrastructure. So let's dig into it. For this one, I brought on

Andy Lubershane. Andy is the head of research at my firm, EIP, and he's been looking at natural gas decarbonization from basically every angle. So we'll try to cover as many of them as we can. Here's Andy. Andy, welcome. Andy, welcome. Thank you, Shale. Excited to be on the new pod. Yeah, excited to have you. So we're talking about the role of natural gas in a deeply decarbonized world or a deeply decarbonizing world maybe in the meantime. So I think there's probably a bunch of what you might call deep decarbonization purists who would ask the question, why are we even having this conversation? There should be no role for natural gas as soon as possible, no matter what, if we're trying to get to deep decarbonization. So let's start by explaining why that's not the conversation. we're having. Why are we not just talking about like eliminate natural gas full stop as fast as possible? The basic answer is just that it's it's really hard to get rid of natural gas in the kind of timeline that I think some of the as you call them purists as as I've referred to this viewpoint before as kind of the climate the climate hipster viewpoint would would have us do.

I mean natural gas is used in just so many end uses for energy today. And it's used in some of the end uses that end up being the hardest to decarbonize on any kind of, you know, 10, 20, even 30 year time frame purely through the prospect of decarbonizing the power supply and then electrifying all of those end uses. So, you know, natural gas ends up, not in all of the hardest to decarbonize end uses, but some of them. We'll talk about this a little more in a bit, but for example, one of the hardest set of end uses to push natural gas out of fully over that time frame is actually all of the distributed uses of natural gas in the gas distribution system, for example, things like home heating. So while I think it's possible that

the purest viewpoint, the climate hipster viewpoint, ends up being the right one in the very long run, it's possible we do move towards a zero fossil fuel, zero natural gas as a portion of primary energy supply, I think it's way too soon to say that that is the only pathway we should be pursuing. So what we're going to talk about is a variety of things here. What is then the maybe the role of natural gas as we are decarbonizing, some of which will be replacing natural gas with other things, and then we talk about what happens to the infrastructure, but also some of which will be, well, how do we just decarbonize natural gas production and usage? But we should also address, like what are the fundamental problems with natural gas?

Obviously, the clear, immediate one is when you burn it amidst CO2. So that on its own, clearly a problem you have to solve for. But I think as you've pointed out to me, that may actually be not the biggest, the thing that causes the biggest threat to natural gas with deep decarbonization. That may actually be more upstream. Yeah, the biggest immediate threat to natural gas, to natural gas's role. even as what it's kind of long been viewed as in the climate world as sort of this bridge fuel, is the fact that there are significant upstream emissions of natural gas today.

And natural gas itself, if you don't burn it, is actually much worse to admit to the atmosphere than carbon dioxide, with a far higher global warming potential, especially in the near term in the next 20 to 30 years than CO2. And so if you look at the most kind of credible, well-respected, widely accepted recent studies of the leak rate, the amount of natural gas that is escaping to the atmosphere, all the way from the wellhead where gas is extracted, all the way to the end use, it ends up being around two and a half percent. That's what came out of a study that Environmental Defense Fund started in 2018. and updated a little bit in 2020. And that 2.5% leak rate doesn't sound like a lot, but it ends up having an enormous impact on the global warming potential

of the entire wellhead to combustion natural gas supply. And the end result is actually kind of frightening for those of us who have been viewing natural gas as at least a near-term way of mitigating and reducing carbon emissions. which is that if you are to burn natural gas in an appliance, in a home, for example, like a home boiler or in an oven, and you take that 2.5% leak rate upstream as a given, then it's actually even a little bit worse in the next 20 years from a global warming standpoint

to burn that gas as it would be to burn coal in your oven. or in your boiler, which is a crazy thing to think about, but it's a fundamental existential problem for any future, an even near-term future that relies on natural gas as a bridged decarbonization or even a long-term pathway to decarbonization through various forms of carbon capture that we'll talk about in a bit. So I do think it's the existential problem for natural gas itself and for all the infrastructure around it. Maybe go into a little bit more detail there than where do those upstream emissions? This is methane leakage that we're talking about. Where are they coming from? So according to the study I referenced, they're coming predominantly, I think, about three quarters from what we think

of as the upstream part of the natural gas value chain. So from the production of natural gas, from drilling for gas, and from sort of the immediate pipes that you put that gas, into that gather natural gas from lots of different fields and then eventually lead them to the big pipelines that bring them to end-use markets. So that's where the bulk of the emissions that were most confident in, the leaks that were most confident in are coming from. It's actually not from, you know, the gas pipelines and the end uses themselves, which are responsible for, you know, only about a quarter. Now, there are other estimates that are also somewhat credible that I would say suggests that we might be undercounting the amount of

emissions that are coming from the midstream and the downstream elements of the natural gas supply chain, basically the pipelines, the big pipelines and the little pipelines. It's something that actually requires a lot more study and a lot more active monitoring and testing, frankly, by the owners and operators of those assets. All right. So as we've said, there's sort of, it's really be difficult to just get rid of natural gas in a short period of time, especially in some of these harder to abate sectors. Maybe we do it in the long term, but in the meantime, we probably need to figure out some interim solutions that could be decades that they, that they last, but there's this big fundamental problem of all of the upstream emissions and midstream emissions as

well from methane leakage throughout the supply chain. So what that's manifesting in, partially right now is like threats to natural gas where, you know, there's a, you know, there's a lot of attention being paid to displacing natural gas. There are natural gas bans for new construction. I live in Berkeley, California. We have one here. I think we're the first city in the country to have one. Actually, there's more of those coming.

But there's also a kind of a bigger version of the threat, which you've described as the potential natural gas death spiral, which is a reference to the utility death spiral that never came to be, but was, you know, lauded as a potential outcome of the distributed energy revolution, I don't know, what, 10 years ago, something like that, where there was a theory that,

because we'd install this distributed energy, then utility costs would go up for everybody else, and that would make it, you know, even more incentive to install more distributed energy, like rooftop solar, and that would make energy more expensive for everybody else and so on and so forth until utilities fell apart or didn't exist anymore.

And that didn't happen, But you've pointed out to me that there is a potential future in which there is a version of a death spiral for natural gas. What would that look like? That's exactly right. So, you know, a decade ago, there was this conception that the electric utility business model was fundamentally existentially threatened by the prospect of a death spiral, prompted by the falling cost primarily of rooftop solar and then eventually batteries. And, you know, I think careful observers at the time did not expect that to come to fruition. But what's interesting is that the prospect of cheap solar and continuously following solar costs

has had the opposite effect on the electric utility business and electric infrastructure overall, I think. And in fact, cheap solar, not rooftop solar, but cheap solar at very large scale is one of the factors that is initiating this possibility of an actual much more threatening death spiral for natural gas infrastructure. And, you know, the basic story is that cheap solar has made rooftop solar systems cheaper, but those systems have actually kind of stalled out at, you know, significantly higher than the cost of large-scale, ground-mounted solar. And that's everywhere in the world, but especially in North America.

And, you know, rooftop solar has lots of... of issues, it can still be a headache for utilities and for grid integration, requires some changes in rate design in order to be sort of economically sustainable for the business and equitable for all electricity customers. But nobody's cutting the cord to the electric utility. And in fact, in some ways, you could argue that rooftop solar was the foot in the door for all these additional distributed energy resources, potentially for lots of additional electrification in the form of vehicles and home heating down the road that actually end up

making electricity much more of a viable prospect for decarbonization at much larger scale. And, you know, in fact, the falling cost of solar has made electricity and clean electricity, you know, the cheapest levelized, non-firm energy cost in the world. and has made the purest mantra of decarbonized power supply and then electrify everything, much more plausible, or at least palatable, for a growing segment of certainly the climate tech world, the environmental community, and increasingly the policy world as well. And, you know, what that means for natural gas is we'll inevitably see some additional amount of low-cost, clean electricity, driving electrification as a decarbonization strategy.

That means that natural gas starts to lose market share in some of its biggest end uses. And it also starts to lose more public perception of its advantages over electricity. People start to think that electrify everything becomes more and more plausible. And simultaneously, natural gas businesses lose revenue. They start to face high.

higher perceived capital market risk. That puts more pressure on R&D budgets. It means more challenges recruiting talent for natural gas businesses. And then most importantly, it means that natural gas infrastructure owners with declining volume of sales need to end up raising their unit prices to cover the fixed costs of their infrastructure

with declining volume. And then as you described with the initial thesis from 10 years ago in the electric utility business, that cycle repeats itself and leads to this death spiral, which is sort of the nightmare scenario that's on the table right now for, for preserving some role for natural gas infrastructure in a period of deep decarbonization. And again, I guess the thing that I want to point out here is that if you're, if you, what you care about is climate and climate change mitigation, then the thing you care about us how do we decarbonize as fast as possible in a way that is equitable to everybody.

And I guess, you know, you might think, well, a natural gas death spiral is good in that context. But I think the point that we're making here is that it's not inherently good for decarbonization in that if you don't have economic alternatives for the hardest to replace sectors, you end up with a situation where costs rise, but emissions. don't necessarily fall for quite some time. Absolutely. And, you know, I come from a background that I think would position me to be among the climate purists out there,

although I would never want to call myself a climate hipster. But I'm a big believer in the long-term advantage of clean electricity, a lot of it driven by cheap wind and solar, supported by very low-cost, long-duration, storage and then that being the fundamental backbone of the energy transition, which also requires a hell of a lot of electrification. But what I've really come to believe in is that electrification, yes, hypothetically could get us all the way there. That strategy could get us all the way there. But it's a risky strategy from the standpoint of total costs, particularly total cost to consumers who can't move as quickly on electrification as generally the wealthier consumers

who are going to be early adopters for distributed energy and new electric appliances and such. And it's also a risk to reliability from a purely electrified standpoint. So I've really come to believe that, you know, I'm not positive gas is worth preserving for the long haul. but I think it's important to preserve optionality to use gas, and also more importantly, the infrastructure that gas flows through today through a period of decarbonization. Virtual power plants are becoming a reliable way for utilities to manage capacity, but enrolling devices is just the start.

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At the high level, if you are trying to decarbonize, but you know you have this gigantic existing market for natural gas and this huge amount of existing infrastructure, I think you have two major options and then a bunch of subcategories within each option. The first option is to continue to extract and use gas methane, but decarbonize it. The second option is don't use methane anymore, but utilize the infrastructure for something else or mothball the infrastructure entirely. So let's take those in order. So the first is continue to use natural gas but decarbonize it.

What are the ways in which you could do that? So the absolute first step you have to take addresses the existential threat to any future for gas that we talked about earlier, which is primarily upstream methane emissions, methane leaks, essentially. You've got to stop the leaks from wellhead all the way to end user, absolutely minimize them as much as possible to make sure that if you're going to decarbonize gas downstream, closer to the point of use, that you don't just end up with a big upstream emissions problem that is being ignored and not dealt with and is actually leading to significant greenhouse gas or global warming potential. So the absolute first thing you have to do, which is basically a no

regrets option, because it actually ends up being relatively low cost, is become a methane emissions hawk and go after those upstream emissions as aggressively as humanly possible. And then beyond that, if you believe that there could be a role for, natural gas as a more than a bridge as essentially a long-term part of a decarbonized future, you have to figure out a way to take the carbon out of the methane. And there's a bunch of ways of doing that. You can do it either before you burn the methane, what is referred to as pre-combustion carbon capture and removal, or you can do it post-combustion, in which case it's what we usually think of as carbon capture and sequestration once you burn the methane, it becomes carbon dioxide,

and you can capture that carbon and bury it underground. I think both of those pathways are interesting and worth talking about, but the prior one is probably the less well known, which is this pre-combustion pathway or set of pathways. All right, you set it up well then. Talk more about the pre-combustion carbon capture. So pre-combustion carbon capture is probably better known today in the hydrogen world by a swath of the hydrogen color pie, which is blue and turquoise hydrogen. And the reason that pre-combustion capture is generally thought of in hydrogen world is because once you take the carbon out of methane, what you end up with is hydrogen. The question is what form you take the carbon out in and what you do with it. So in the case of blue hydrogen, which is probably the better known of the two, you can separate the carbon from hydrogen in a number of different ways, but you strip it off and it becomes a CO2 molecule and then you have to capture that CO2, which you can do through similar processes as you would capture CO2 from in a post-combustion environment.

and then you pump it into pipelines and sequester it typically in, you know, big geological repositories. Turquoise hydrogen is a related process, but the difference is that by a family of processes, usually involving pyrolysis, you strip the carbon off of methane in solid form. So what you end up with is solid carbon and gaseous hydrogen. Which has a number of benefits relative to capturing carbon in gaseous form. In that, one, it's solid carbon so it's easy to store and sequester. You don't need pipelines or anything like that. It is inherently stable.

And two, actually, there is a market for solid carbon. So depending on what you're actually producing, you can potentially sell that. For example, if you're producing carbon black, you sell it to make tires and things like that. So yeah, in both cases you get zero carbon hydrogen. And, you know, provided you've dealt with the upstream methane emissions problem, you can credibly claim that that hydrogen has a near zero carbon footprint and can be combusted in all kinds of downstream end uses that can use clean hydrogen, which I'm sure you've talked about in lots of other pods before this one.

But the difference is that in the case of blue hydrogen processes, you then also have to build a whole new set of infrastructure to transport and permanently dispose of that gaseous carbon dioxide that you've captured before you take the hydrogen away. And that's a significant challenge for most facilities. it's going to require big networks, oftentimes shared networks of CO2 transport pipelines. It's going to require large permanent geological sequestration facilities. It's a big coordination problem to get enough carbon capture facilities out there and get them all hooked up to these pipelines and sequestration sites to make it cost effective. Meanwhile, if you have turquoise hydrogen, you get solid carbon. And at the very worst, solid carbon is a much easier waste problem to deal with.

It's a solid waste problem. You know, solid carbon can be relatively easily and safely landfill, you know, in the very worst case scenario. In the best case scenario and what's happening today with some kind of early players in the turquoise hydrogen market is if you produce solid carbon in the right form, there's actually not all solid carbon is made equal, but if you produce really high quality, high-grade solid carbon, it has a real value today in a lot of end markets. Those markets aren't huge today, but they're big enough to soak up, you know, a significant amount of the, you know, the early projects one could roll out that are producing hydrogen through this process.

And because that solid carbon has such high value, buy down the cost of the hydrogen that you're making significantly. Okay, so far we're saying prerequisite, mitigate upstream emissions, methane leakage. If you don't do that, none of the rest of this stuff matters. But assume you do that or you're on the pathway to doing that, then you can use carbon capture, either pre-combustion or post-combustion as one mechanism to decarbonize natural gas. The other that has gotten a fair amount of attention is renewable natural gas. So explain what renewable natural gas is and then, you know, how far. far it could actually take us in decarbonizing the natural gas sort of ecosystem.

Renewable natural gas is methane, just like normal natural gas, but it's produced from various biological pathways. Today, most renewable natural gas comes in the form of methane emissions from basically landfills and cows and pigs and another livestock. So it's pretty limited in supply. a niche fuel source. But the nice thing about it is it does essentially fully substitute for natural gas. You can stick it in a natural gas pipeline relatively easily without any real significant changes. And although it's much more expensive to collect and get into those pipelines than natural gas extracted from the ground, it has a net zero carbon profile because, well, in some cases, it would otherwise be emitted to the atmosphere.

And in other cases, it's coming from, you know, biomass sources that are soaking it up from the atmosphere to begin with. The problem with all those sources of RNG landfills and cows and pigs is that they just don't scale to serve anywhere near the full amount of natural gas demand that we have today. And so in order to scale renewable natural gas, you'd have to move on to more complex technological pathways. And for the most part, what that means is taking different forms of biomass, usually what's called cellulosic or woody biomass, things like switchgrass and poplar trees and corn stalks and gasifying them. So you take this biomass that has in the beginning of its life cycle sucked up carbon. dioxide from the atmosphere. Then you put it through a gasification process, which is actually a fairly well demonstrated process. It's been done on coal in various places at full scale. And then once you gasify that biomass, you've got a bunch of carbon and oxygen and hydrogen elements. You can play

around with them and you can put them into methane molecules. And then it's basically just another pathway to producing RNG. Now, even that pathway can't scale to fully supply or even really nearly fully supply or replace the methane that we're using today. But it could take a more significant chunk out of it. It's generally, at least today, a far more expensive pathway. You know, we're talking more than five times as expensive, probably more than 10 times as expensive as as natural gas. But it is one credible way of decarbonizing a decent chunk of natural gas supply. Okay, so those are our pathways to keep using natural gas, to keep extracting and using natural

gas, but decarbonize it. Let's talk about the pathways to not keep using natural gas. So the first one is keep using the natural gas infrastructure that we've built because we've got a lot of capital in the ground and a lot of pipelines and a lot of infrastructure that we might still want to use, but maybe we don't use it for natural gas anymore. And so this is where I think hydrogen is probably the sort of most commonly discussed strategy. Now, this is distinct from, as you mentioned before, turquoise hydrogen or blue hydrogen, which says keep using natural gas in the existing infrastructure and then turn it into hydrogen

and decarbonized hydrogen at the end of the day. this would be replacing at least some amount of the natural gas in the pipes with hydrogen. So what are the prospects there? So the challenge for replacing natural gas with hydrogen in existing pipelines, I guess there's multiple layers of challenge. The first is that not all pipelines, most pipelines, can't accept very high, significant levels of hydrogen as they are today. without significant retrofits to prepare those pipes for higher blends of hydrogen.

So most pipelines we're learning today can probably take up to 20% hydrogen by volume, which is somewhere around 7% hydrogen by energy content. Before you need to start, at the very least, making some changes in all of the ancillary equipment, the pumps and compressors and such that move the gas around. and particularly in the case of older metal pipes, you also need to basically substitute those pipes for newer plastic pipes that can actually contain hydrogen. Hydrogen, I've heard from people that are much more technically inclined than I am is just a tough gas to work with. It does not want to stay contained. And so readying the infrastructure itself to accept meaningful amounts of hydrogen without having significant amounts leaking out or corroding those pipelines is another non-rengths of hydrogen is another non-rengths of hydrogen without having significant amounts leaking out or corroding those pipelines is another non-rength.

untrivial challenge, but actually one that I think can be done at relatively palatable cost in many cases. The bigger challenge for hydrogen blending into pipelines at any meaningful scale is that once you put the hydrogen in the pipe, whatever mix of hydrogen and natural gas you have in the pipe in that network ends up going to all of the end users that are connected to that network. And so that means you have to make sure that all of the end users are prepared to accept and use in their processes the same blend, the same percentage of hydrogen. And, you know, that's hard enough to imagine doing on gas midstream pipelines where you're serving, you know, big industrial facilities who, you know, maybe can again take 7% hydrogen by energy content

without any changes to their processes. But once you get up, to 20, 30, 40%, even hydrogen by energy content would need to start making significant changes to their processes or suffer from some sort of critical safety risks, given the differences in combustibility and properties of hydrogen and natural gas. And, you know, so basically you'd have to go to all the industrial facilities served by the same pipe and prepare them for the same sort of gradual transition to hydrogen. that's a pretty implausible scenario, even at that large industrial scale. And I think it's an almost entirely implausible scenario at the distribution level.

So once you get down to natural gas distribution systems where you've got, you know, smaller pipelines going through cities and service lines going to individual homes and businesses, is coordinating a transition of all of the end-use equipment served by those pipes simultaneously, I just don't see as being the kind of coordination that most jurisdictions are going to be capable of doing. And so, you know, just to put a fine point on it, I think we could get to the point we were blending significant amounts of hydrogen in pipelines, but I just don't really see a a credible pathway to blending hydrogen in end users, essentially, and coordinating the transition to hydrogen at the end use level.

So what it might mean is that it doesn't make that much sense for the solution to be, to blend hydrogen into existing pipelines. But it's important to distinguish that from building new pipelines specifically for hydrogen, which may actually make a lot of sense. And in fact, we already have hydrogen pipelines piping hydrogen around. in the areas where we use a lot of hydrogen today, we may be able to do a lot more of that. And I think what you're saying is that may make more sense

than just trying to retrofit and blend in the existing infrastructure. I think so. And, you know, when you think about another color of hydrogen that we didn't talk about yet, which is green hydrogen, which is what most people think of as the kind of most likely clean hydrogen source in a lot of areas today, there's actually a lot of advantages to moving energy over long distances via pipeline, via hydrogen pipeline.

The big advantage there is that green hydrogen made from renewables is probably going to be done at the lowest cost, if it's done at very large scale, from the cheapest possible renewables you can access, which is wind and solar plants way out in the middle of nowhere. in the desert and in the windy plains. And I really believe that over the coming decade or two, we're going to see more and more constraints on building out long-distance electric transmission infrastructure to serve and to bring that, those massive renewable resource potential to market.

And, you know, if you look back at the past couple of decades at differences in infrastructure cost, it turns out to be at least three times lower, oftentimes much, much lower, to move energy via pipeline than via electric transmission line. If you sort of normalize to, you know, dollars per megawatt per mile, pipelines are just a better, cheaper way of moving energy. And so if you can set up new very, very low cost, not even grid connected renewables way out in the middle of nowhere at very large scale and pipe that hydrogen that you can produce via electrolysis from those renewables to big industrial demand centers,

either via new hydrogen pipeline or maybe via a repurposed natural gas pipeline that as gas demand declines is no longer needed to move gas. I can see that being a really compelling value proposition. Okay. So we've talked about, I think, basically all of the pathways here, except the one that, you know, probably gets the most attention, which is stop using natural gas and electrify stuff. So I think we should talk about it for one minute. What are the things that are most easily electrifiable?

And then what's on the other end of that spectrum? So, you know, in the realm of natural gas demand, nothing is entirely easily electrifiable. But you know, as distinct from petroleum, for example. example. Correct. Yeah. Yeah, right. I believe the most electrifiable end use that's not currently electrified out there is vehicles,

is ground transportation that currently is run almost entirely on oil. You know, natural gas, the biggest source of natural gas demand is power generation, which kind of can't be electrified. It produces electricity. Beyond that, there's a lot of natural gas consumed in industry for producing industrial heat for all kinds of different processes. And then there's a lot of natural gas that's consumed at the distributed level in homes and businesses predominantly for space heating, as well as for, you know, water heating and cooking. And then there's also a bunch of natural gas consumed in

industry as a feedstock for producing chemicals, for example. So of those end uses, I think that there's electrification potential basically everywhere. I see a bunch of interesting technology options out there that can potentially eat into natural gas demand and market share, maybe even take it away entirely in some facilities via electrification of industrial heat. I can certainly see a huge amount of potential for electrification of building heat at the distribution. level via electric heat pumps of various types. But I think what you find in almost every use case, and I would say in particular, again, in the distributed use cases like building heating, is that maybe the first, you know, the first 50% of gas demand that you soak up with electrification

is relatively easy. And then maybe the next 25% is, a little bit harder, and then it gets exponentially harder and harder and more and more expensive to fully decarbonize via electrification. One just simple way of thinking about that is in the world of home electrification. Heat pumps benefit a lot from relatively high efficiency of conversion from electricity to getting heat into your home, even at pretty cold temperatures, like, you know, 10 to 20 degrees, you know, above zero Fahrenheit. But once you get significantly below zero, that efficiency drops off. And so the amount of electricity that you have to consume to serve peak winter heating

demand kind of sky rockets. And that means much higher costs for, you know, sizing heat pump and heating electrification equipment, and it means much higher cost for peak electricity supply and everything from generation down to electric distribution. And so one of the areas that I think it's important to preserve some kind of role for gaseous fuel delivery is probably going to be to serve that last X percent, I'm not quite sure what it is, of building heating load for which a pure electrification strategy would cause costs most likely to skyrocket. All right. So given all of that, back to our original question, let's just say we are, you know,

we globally, or at least in North America, take deep decarbonization pretty seriously over the next decade. And the things that can be electrified start to get electrified, the things where there is some alternative pathway, those pathways. pathways emerge relatively quickly. What then is the role of natural gas? Like where, where are we still using it and how is it shipped around in, I don't know, 15, 20 years? Yeah, I mean, I think there's a, there's a scenario in which in a very rapidly decarbonizing world, probably the best preservation of use for natural gas and gas infrastructure, which are, you know, abundant, low-cost

resources that already touch, you know, most end users in the country. I think one of them is through probably, like, I'm actually very excited about this turquoise hydrogen pathway or a blue hydrogen pathway that decarbonizes gas, natural gas, at the end of, you know, or at the point of consumption from large, large scale pipelines for industrial facilities. And I think we could certainly see that being a significant pathway for industrial decarbonization alongside also a significant amount of electrification and potentially a significant amount of green electricity, I'm sorry, green hydrogen piped in from elsewhere. And then where I'm pretty confident we'll see the longest tail of natural gas for the foreseeable future is in

all of the end uses that are currently served by natural gas at the distribution level. So again, that's predominantly building heating. Interestingly enough, while it seems innocuous, we don't think about it all that much in the scheme of kind of big energy end uses, I'm kind of convinced that building heat ends up turning out to be one of the toughest to just sort of fully decarbonize for a bunch of the reasons we've been talking about today. And I think it's one where, you know, natural gas will continue to play a role for quite a long time to come. And frankly, in a real net zero scenario, you might even still see some amount of natural gas that is consumed for peak heating load and for resilience purposes.

One thing we didn't talk about much so far on the pod is the resilience value of having multiple ways of delivering energy. to end users, both in the form of electricity and gas. And I think there's some real and not fully appreciated value there. So in that case, we need to deal with those emissions elsewhere, which probably means more carbon removal elsewhere in the system. Which is a topic for another day and one that we will have before too long. But in the meantime, Andy, thank you for schooling me and all of us on the future of natural gas. It's a pleasure.

I've become a bit of a zealot in this area. So I appreciate the chance to share my zeal with all of your listeners' show. You could have come across more zealous, I will say. You seem very sober and clear-minded. I try to stay measured on podcasts. Yeah, right. It's only afterwards. You go crazy.

All right. Thanks again, Andy. Thank you. Andy Lubershane is the senior vice president of research and strategy at energy impact partners. Catalyst is hosted by me, Shale Khan. This show is a co-production of PostScript Media and Canary Media. Find any of us, me, Canary, and PostScript on Twitter, tag us if you want to provide feedback on this episode or if you want to suggest future topics. For instance, here's a tweet from Brian de Nuno, handle at B. de Nonao.

Brian was responding to Canary's announcement about Catalyst. list and I quote, quote, glad to see this. The Interchange was my son's favorite podcast. That's my previous podcast, in part because he really likes Shale Khan's sense of humor, which I'll admit definitely feels like a parenting failure. I'm not entirely sure how to feel about that, but thank you, Brian. Anyway, we can't respond to everything you send our way, but we do read all of it, including Brian's not-so-subtle jabs at my comedic chops. You can find links for this episode's topic and guest in the show notes. or go to canarymedia.com.

Our producers are Daniel Waldorf and Stephen Lacey. Sean Marquand composed our theme song. I'm Shale Khan, and this is Catalyst.