Natural gas and net zero: Can they coexist?

By Edward Klump | 10/13/2021 07:13 AM EDT

A new goal from a Texas-based utility company illustrates the challenges of reaching net-zero emissions in combination with natural gas.

CenterPoint Energy Inc.'s A.B. Brown Generating Station is pictured outside Evansville, Ind.

CenterPoint Energy Inc.'s A.B. Brown Generating Station is pictured outside Evansville, Ind. CenterPoint is proposing to replace the facility's aging coal-fired units in part with natural gas-fueled generation despite a new net-zero goal for greenhouse gas emissions. PBurzynski/Wikimedia Commons

A new net-zero goal from CenterPoint Energy Inc., a Texas-based utility company, contains an eye-catching 2035 timeline that puts it 15 years ahead of many industry peers.

But the pledge to slash greenhouse gas emissions also arrives with asterisks that critics say undermine its value.

That’s in part because CenterPoint has both natural gas and electricity operations — and most of its greenhouse gas emissions are tied to customers’ gas use that is outside the net-zero goal. The company also is planning to build some gas-fueled generation in the name of affordable and reliable power.


“It’s pretty pure public relations here,” said David Pomerantz, executive director of the pro-renewables Energy and Policy Institute.

CenterPoint’s net-zero commitment, outlined in September, adds to a growing debate about how utilities’ low-carbon goals may play out on the ground and what role natural gas could have in a decarbonizing world. CenterPoint is distinctive in that its generation assets aren’t a huge part of its business, but they illustrate broad challenges facing the power sector as it tries to cut emissions.

CenterPoint, for example, must balance coal unit retirements with other electricity sources to meet its 2035 goal and maintain reliability — a situation that other companies are grappling with around the country. And like other utility companies, having operations tied to gas also complicates more far-reaching efforts to cut carbon for CenterPoint.

Pomerantz described elements of CenterPoint’s approach as “green washing,” a charge that has been leveled at utilities by climate advocates to suggest corporate actions are insufficient.

It’s also a claim the electric industry rejects amid coal plant retirements and a surge in renewables. The Edison Electric Institute has pointed to a roughly 40 percent drop in carbon dioxide emissions for the U.S. power sector at the end of 2020 compared with 2005 levels. More than 30 members of EEI, which represents investor-owned electric utility companies, have specific net-zero, carbon-free, carbon-neutral or 100 percent clean energy goals. The timing for many of those is around the midcentury mark.

Power companies also have an incentive to reach a greener grid because of new demand for power from electric vehicles.

“With great power comes great responsibility, so we have to continue to make the electric supply as clean as possible,” said Emily Fisher, general counsel and senior vice president for clean energy at EEI.

The Biden administration has called for decarbonizing the U.S. power sector by 2035, though the path to get there is uncertain amid political wrangling over the potential Clean Electricity Performance Program under consideration in Congress along with other measures. How to address natural gas emissions also remains an open question among many policymakers and utility companies.

CenterPoint’s net-zero carbon emissions timeline for electricity is in line with President Biden’s 2035 goal, although the company’s generation holdings were less than 1,500 megawatts of installed and purchased capacity combined last year. Its core Texas electricity business is focused on poles and wires, for example.

Jason Wells, CenterPoint’s chief financial officer, said recently that the company’s net-zero plan is backed by clear and transparent steps. He said “our environmental leadership” influences everything from allocating capital to working with regulators to adapting to customers’ needs. CenterPoint’s plans include tapping renewable energy and examining battery storage.

“While we may be late in terms of announcing a net-zero carbon reduction goal, we had been working rapidly to reduce our carbon footprint,” Wells said during a Sept. 23 analyst day presentation.

That doesn’t mean gas is on the way out. During the meeting with analysts, Houston-based CenterPoint outlined the potential for $16 billion-plus of gas business-related investments over a decade to go along with $23 billion-plus of investments tied to electricity. The company’s core regulated businesses are slated to be around 60 percent electric and 40 percent gas after the planned sale of local gas distribution companies in Arkansas and Oklahoma closes.

Clean energy advocates liked some ideas mentioned by the company, such as weatherization and gas conservation, while citing gas-related emissions as something for leaders to examine.

“They may need to take some consideration into their business model and think about whether for the long term natural gas delivery is the way that they really want to go,” said Stephanie Thomas, a researcher and community organizer who focuses on the Houston area for Public Citizen, a consumer advocacy group.


Eyeing natural gas

Heating and cooking are staples of residential gas use in parts of the country, but debates continue about the role of gas in a society trying to slash carbon and battle climate change. Advocates of electrification are pushing for cleaner power generation combined with more reliance on electricity in homes and businesses.

Like a number of utility companies, CenterPoint has a foot in both power and gas. That includes electric delivery operations in the Houston area and a smaller power generation and electric utility business in Indiana. Its local gas distribution operations have customers in Texas as well as parts of Minnesota, Indiana, Ohio, Louisiana and Mississippi. And the company is in the process of exiting a midstream business tied to oil and gas.

What to do about so-called Scope 3 emissions tied to customers’ use of gas is perhaps the biggest challenge facing both CenterPoint’s plans and net-zero greenhouse gas ambitions among utilities with gas customers.

Scope 1 emissions, for example, from the direct operation of its assets totaled the equivalent of about 5.2 million metric tons of carbon dioxide in 2020. Scope 2 emissions topped 58,000 metric tons from purchased electricity and line losses, excluding certain emissions related to the Houston area. CenterPoint said its 2035 time frame for net zero in these scopes is well ahead of a peer average.

“But we don’t just want to achieve emission reductions faster,” the company said in an emailed statement. “Our Net Zero goals are based on actionable decarbonization pathways taken on our operating systems — both electric and natural gas — within our footprint.” The CenterPoint website and recent analyst day discussion provide some details of its plans.

Scope 3 emissions for CenterPoint were about 26.7 million metric tons in 2020, based on the amount of natural gas supplied to end-use customers. That scope represented about 83 percent of its emissions for 2020, according to the company.

It said Scope 3 emissions are projected to fall 20 to 30 percent by 2035 from 2021 levels. CenterPoint said that makes it a leader among natural gas utilities.

Still, the planned reduction put forth by CenterPoint’s leaders for the utility business didn’t impress Pomerantz.

“At that rate, they’ll still have emissions from selling their customers gas for many decades, which is not compatible with where we need to go,” he said.

But EEI’s Fisher said the electric industry often focuses on Scope 1 and 2 emissions that cover generation and purchased power. She said Scope 3 emissions are hard to calculate and subject to a lot of debate.

“As an industry, we’re the second-largest source of carbon emissions in the nation, so just focusing on our Scope 1 emissions is pretty significant,” she said.

Options listed by CenterPoint to address Scope 3 gas emissions include pilots for hydrogen and commercial carbon capture and storage, as well as energy efficiency and conservation programs. As far as new actions, it cited options such as renewable natural gas offsets, high-efficiency appliances and new technology.

“The methods that CenterPoint says it will use to reduce the greenhouse gas pollution of its gas business also call the integrity of the plan into question,” Pomerantz said in an email. He called for aligning policy advocacy with climate goals, as well.


‘All progress is good progress’


EEI’s Fisher noted the flexibility of power generation to depend on different resources. With natural gas still in the power mix, she said, work can be done on fugitive emissions.

When asked about gas and climate goals, the American Gas Association pointed to past comments, including a position statement on climate change. The industry group’s document lists gas utility commitments such as reducing methane emissions from gas utility systems, supporting renewable natural gas development and encouraging and supporting energy efficiency.

Thomas with Public Citizen noted that CenterPoint doesn’t appear to be focusing its message on more use of building electrification, though she said that is “one of the simplest and efficient ways that we can reduce emissions.” She touted the idea of having electric-ready buildings so consumers can make a choice to use more electric appliances in their homes.

Fisher said there are places where electrification can make a lot of sense and help reduce emissions and be good for customers. The power sector is working on transportation electrification as a way to reduce emissions given that sector’s leading role in U.S. carbon emissions, she said.

Electrification advocates have criticized support by companies such as CenterPoint for H.B. 17, which passed the Texas Legislature earlier this year and was signed by the governor. It prohibits local jurisdictions from banning utilities from delivering certain energy sources, thus potentially limiting efforts to curb natural gas use.

On the power side, CenterPoint has seen pushback from its plan in Indiana to replace coal-fueled generation in part with natural gas-fueled capacity (Energywire, Aug. 24). Using power from wind and solar also is part of its outlook.

The company’s website says a plan to add two gas combustion turbines in Indiana “will maintain our commitment to a clean energy future while preserving the local economic value created by our facilities and providing our customers an affordable option for delivering abundant, safe and reliable energy.”

While every system is different, Pomerantz questioned how new gas-fueled generation would fit with a net-zero plan for Scope 1 emissions by 2035. CenterPoint’s plan envisions that offsets or credits could constitute 10 to 15 percent of its 2035 net-zero goal. The company said it will report emissions reductions in a transparent and timely way.

CenterPoint’s generation portfolio is small compared with those of numerous big U.S. utility companies, but Fisher said “all progress is good progress as we try to reduce emissions.”

Mike O’Boyle, director of electricity policy for Energy Innovation, an energy and climate policy think tank, said via email that CenterPoint’s net-zero plan for generation and purchased power by 2035 “is exactly the kind of ambition that other utilities will need to show.”

O’Boyle said CenterPoint also is right to see methane leakage as a priority.

“However, to reach net zero emissions economy-wide by 2050, any natural gas utility will have to focus not just on the carbon intensity of the fuel supplied, but also facilitate a just and equitable transition away from natural gas as a fuel,” he said. “And this transition needs to start now.”