U.S. utilities that run on natural gas have been fervently touting hydrogen as a key way to remain relevant in a world rapidly rethinking fossil fuels. The reality is going to be more complicated.
Hydrogen is a lightweight gas often marketed as cleaner than fossil fuels, with even environmental critics agreeing it has a role to play in decarbonizing heavy industry. Now, U.S. utilities are jumping on the hydrogen bandwagon, announcing over the past two years more than two dozen projects involving its production and distribution. From Dominion Energy Inc.’s pilot plan to blend the fuel with natural gas supplies in North Carolina to Southern California Gas Co.’s proposed pipeline system to supply pure hydrogen to Los Angeles, outlining a future awash in hydrogen is on seemingly every energy company’s to-do list.
There’s no question why gas utilities whose entire business model appears to be under existential threat would be leaning into hydrogen as a potential savior: As a whole, they’ve been trading at a discount to electric utilities because investors are worried that anti-gas bans like those in California and New York City will erode their core business. With gas utilities now talking about decarbonizing their systems by blending in hydrogen or biogas — or even supplying pure hydrogen to industrial users in some cases — investors can more easily envision a future for gas-powered utilities.