Natural Gas Innovation Act

This landmark law establishes a new state regulatory policy that encourages natural gas utilities to use clean energy resources and innovative technologies to help the state meet its renewable energy and greenhouse gas reduction goals.

In particular, this law creates the opportunity for a natural gas utility to submit an “innovation plan” to the Minnesota Public Utilities Commission. In the plan, a natural gas utility could propose to offer new clean energy options, such as renewable natural gas (RNG) and renewable hydrogen gas, as well as innovative energy-efficiency and carbon-capture technologies.

• Diversifying the state’s energy supply with local energy sources,
• Encouraging technological innovation,
• Improving waste management and
Supporting job creation and economic development, especially in rural areas

For example. RNG can be produced from agricultural manure and other farm waste, so it represents an important new economic opportunity for farmers and rural communities. In addition, converting farm waste into RNG can help reduce agriculture-related greenhouse gas emissions. (According to the Minnesota Pollution Control Agency, the agriculture sector accounts for about one-quarter of all greenhouse gas emissions in Minnesota, with animal agriculture responsible for the majority of methane emissions.)

Under this law, the Public Utilities Commission would have to approve a natural gas utility’s “innovation plan.” To limit the potential impact on customers, the maximum allowable cost will start at 1.75% of the utility’s revenue in the state and could increase to 4% by 2033, subject to review and approval by the Public Utilities Commission. The actual cost for any specific customer would depend on their gas usage and the details of the alternative resource plan as reviewed and approved by the Commission. For a typical CenterPoint Energy residential customer, the maximum expected cost could be about one dollar extra on their monthly bill starting in 2023, based on current rates and the specific plan approved by the Commission.

Several states – including Oregon, Washington and Nevada – have passed recent laws specifically to promote renewable natural gas, including requirements for natural gas utilities to purchase RNG and for voluntary RNG purchase programs for utility customers.

The Minnesota law is distinctive because it encompasses a broader range of potential clean energy resources and technologies.

A recent study prepared for the American Gas Foundation analyzed the potential nationwide resource base for RNG. The study estimated that, by 2040, approximately 4,513 trillion Btu of RNG could be produced annually. Bringing those RNG resources online would be equivalent to a 95 percent reduction in greenhouse gas emissions from the natural gas residential sector. The original version of the Natural Gas Innovation Act legislation included a provision requiring a study of the state’s potential for renewable natural gas production. However, this provision was no longer needed in the final version, as passed, because the Agricultural Utilization Research Institute (AURI) and University of Minnesota have announced that they will jointly complete this study. CenterPoint Energy is providing financial support.

Promising technologies that use electrolysis powered by renewable electricity to create zero-carbon hydrogen gas from water are not yet commercially available in the United States. However, the potential of these technologies has been proven with demonstration projects, and they are now being developed on a commercial scale in Europe.

Many analysts believe this type of technology is at an emerging stage of commercial deployment similar to where wind and solar were only a short time ago in the electricity sector.

CenterPoint Energy is currently operating a field demonstration project in Minnesota to produce and use renewable hydrogen that went online in late 2021.

One exciting carbon capture option is innovative new technology developed in Canada that captures carbon dioxide emissions from natural gas at the customer’s point of use. The emissions are converted into a carbonate powder that can be reused in commercial products. This technology has the potential to reduce greenhouse gas emissions, save energy and generate revenue for utility customers from the sale of the carbonate powder.

CenterPoint Energy is currently preparing a pilot project to install 10 of these carbon-capture units with commercial and institutional customers in Minnesota.

Depending on how much low- and no-carbon energy is actually on the electric grid, electrification is one approach that may reduce emissions and serve as a cost-effective alternative energy source.

However, electrification is not likely to be feasible or cost-effective for many uses currently served by natural gas in Minnesota.

For example, with the state’s cold winters, Minnesota’s electric grid would have to more than double its existing capacity to meet peak-level heating needs currently served by the natural gas system. (This is in addition to the expanded electric grid capacity that would also be needed to serve electric vehicles on a large scale.) In addition, the electric infrastructure can be vulnerable to weather-related service disruptions.

Under the Natural Gas Innovation Act, CenterPoint Energy will be able to explore and evaluate pilot projects that use a combination of electric and natural gas heating in homes. These pilot projects would use efficient electric heating in the fall and spring months, when heating demands are lower and there is abundant renewable electricity available. Natural gas would continue to be used in the cold winter months. This approach could maximize the use of renewable energy without requiring a dramatic, costly expansion of Minnesota’s electric system or sacrificing the reliability and affordability benefits of natural gas heating.