Can hydrogen or biogas truly replace natural gas?

With a gas supply crisis in some states the looming question is whether hydrogen or biogas could become commercially-viable replacements any time soon. This especially applies to heavy industries that are not able to completely electrify at this point.

While the gas sector is hopeful, others are not so sure. Environmentalists tend to prefer electrification, as natural gas alternatives come with their own issues.

A (partial) ‘yes’ answer

Bioenergy Australia CEO Shahana McKenzie thinks adopting biomethane is feasible due to its immediate market-readiness. As a “drop-in natural gas substitute”, biomethane can be an essential player in Australia’s energy transition.

“It can enable gas users to quickly and cost-effectively decarbonise, while also scaling to play a significant role in decarbonising the gas supply system over the next decade and beyond,” she says.

McKenzie points out that biomethane is already driving down emissions globally. She says in Australia it can become immediately deployable using existing infrastructure and appliances, without the need to upgrade, in turn reducing the total cost of delivery.

Of course, it will require the right policy settings. But McKenzie is confident of biomethane’s possibilities, quoting ARENA’s 2021 bioenergy roadmap in saying it has the potential to represent 23% of the total pipeline gas market by 2030.

As for hydrogen, McKenzie says that the technology is not currently available or economically feasible. She adds that when it does develop it may not be available in time to help us reach our net zero targets.

With regard to Australia’s manufacturing industries, McKenzie says that gas will remain an integral part of the energy mix, as there are limited alternative technologies available for heating, refining and other processes.

“For these sectors that cannot fully transition to electrification or its alternatives, biomethane presents as the only genuine decarbonisation solution,” she says.

“Biomethane is game-changing in its application: clean, cheap, proven, and importantly, ready for immediate use.”

A ‘no’ response – for now

Tim Buckley, Director at Climate Energy Finance, has a different perspective. He’s wary of any claims by the fossil fuel industry about lower-emissions gas alternatives – pointing out how gas sector has constantly undermined action to deliver on the climate science.

Buckley’s view is that to put hydrogen or biogas on a credible path to commercialisation, we need a price on carbon emissions. However, he says, the gas industry has helped to make this idea “politically toxic” in Australia.

On the question of whether lower-emissions alternatives will be available in time, especially with some state governments banning new connections, Buckley thinks that gas users should be “entirely concerned”.

He points to China, where unlike Australia, there is substantial investment in research development and deployment (RD&D) in all zero-emissions industries.

“CATL, the world’s largest battery firm, spends US$2bn annually on technology developments. The investment in R&D by the fossil fuel industry is next to zero by comparison, the industry is far more interested in lobbying for delay and inaction.”

Another point Buckley makes is that the gas sector is starting to lose support in Australia, especially having pitched the lobbying mantra for the last decade that gas is a transition fuel.

“Investors have realised the transition fuel argument was a delaying tactic,” he says, “one that is unsupported by any credible RD&D”.

In the meantime, says Buckley, “global investors have watched electric vehicles win the race against hydrogen in the passenger vehicle market, and increasingly in buses and larger trucking segments.”

Full electrification – a more feasible option?

Buckley believes that those who prefer full electrification have a valid point. For households, he says, it would halve the annual connection costs for a start since they would only need to pay to connect to the electricity grid. He also says in a period of hyperinflation, the gas industry has ignored both its “social licence” to operate and the surging consumer investments in renewable electricity technologies – such as ground heat pumps, EVs, rooftop solar and behind-the-meter batteries.

At least for the residential sector, Buckley’s view is that “electrification of everything” and decarbonisation of the grid are the best solutions to fossil fuel hyperinflation, and to meeting our climate goals in time.

In discussing hydrogen’s potential, Buckley believes the “hydrogen hype of 2020-21” has faded. He says that while good progress has been made, it will be another decade before hydrogen will become commercially viable at scale.

“Meanwhile, electrification is commercially viable today, even without a price on carbon emissions.”

When it comes to heavy industry, Buckley says investors don’t want to be left with gas pipeline stranded assets, which means capital is pivoting towards zero-emissions alternatives. But he reiterates that this will require a credible price on emissions and supportive government policy to work.

Buckley says the race for zero-emissions gas alternatives for industry is being led by China, with the US and other countries responding in turn.

“The race to the top is definitely on,” he says.

So back to the original question – it appears that biogas and hydrogen both have potential, but that there are some hurdles to overcome.

McKenzie sees biogas as the most feasible immediately-available option, while Buckley says we need both a big increase in RD&D and a credible carbon price for natural gas alternatives to work on a commercial scale.

At this point it’s not clear which technology will win the race in Australia!