Members of Indiana-headquartered utility NiSource Inc.'s management team believe investments in natural gas infrastructure could prove just as critical as improvements to the electrical grid when it comes to achieving the sector's clean energy transition, advocating for a broad path to achieving the nation's climate and energy goals.

"It's a complex issue to completely decarbonize and to change the energy infrastructure of the country," NiSource Executive Vice President and COO Pablo Vegas told S&P Global Market Intelligence, adding there is not a "binary" solution. "You really [have] to look at all of the solutions out there."

NiSource plans to invest up to $10.6 billion from 2021 through 2024 in its electric and gas operations, with $2 billion earmarked for renewable energy investments. The company has identified about $40 billion in long-term infrastructure investment opportunities over the next 20 years.

The investments correspond with NiSource's carbon-reduction goals and the retirement of units in the company's fossil fleet.

NiSource is focused on cutting its carbon emissions by 90% from 2005 levels by 2030, at which time the company will no longer own or operate coal-fired generation.

"We look beyond 2030 now and, how do we achieve even deeper decarbonization?" Kelly Carmichael, NiSource's vice president of environmental policy and sustainability, said in a Nov. 15 interview.

NiSource, however, still sees a viable role for natural gas in the clean energy future.

No more coal

NiSource utility subsidiary Northern Indiana Public Service Co., or NIPSCO, in October unveiled a preferred energy resource plan that calls for the retirement of its 455-MW Michigan City coal plant in LaPorte County, Ind., between 2026 and 2028. This capacity is expected to be replaced by a combination of renewables, storage and natural gas.

The preferred path in NIPSCO's 2021 integrated resource plan, or IRP, calls for a natural gas peaking unit of up to 300 MW to replace two gas peaking units at the 155-MW R.M. Schahfer CT plant in Jasper County, Ind. The older units, operating since 1979, are scheduled to be retired between 2025 and 2028 while the new unit "may be hydrogen-enabled."

NiSource Executive Vice President and CFO Donald Brown noted that "in the future" the company could explore a pilot project that involves injecting hydrogen into its 563-MW Sugar Creek plant in Vigo County, Ind., as a way to reduce the combined-cycle natural gas plant's carbon impact.

As NiSource evaluates new roles for natural gas, NIPSCO is moving forward with plans to retire its remaining coal capacity well before the end of the decade.

NIPSCO shut down two units at its R.M. Schahfer plant in October and plans to retire its remaining 722 MW of coal-fired capacity around 2023.

"You're going to need more transmission as those generation plants are changed out," said Brown, who is also president of NiSource Corporate Services. "If there's more energy demands going through the electric system, we're going to need more investment on the distribution system side as well as the transmission side."

Vegas, who is also president of NiSource Utilities, noted that NIPSCO's IRP includes flexibility in the type of capacity and the size of the total resources proposed to replace older fossil-fueled generation, as well as in the timing of potential retirements.

"That flexibility was purposeful because there is going to be some pretty important changes that we need to keep an eye on in the coming years," Vegas said. "We need to look at how the [Midcontinent ISO] rules are going to change around the peak capacity requirements [and] the margin requirements. We've got to look at federal legislation and what comes out with the Build Back Better [bill] and how the infrastructure bill evolves."

Guiding the transition

Executives pointed to the importance of state and federal legislation to providing incentives for the full potential of natural gas.

"There are opportunities as we look longer-term past 2030 and deeper decarbonization opportunities in the gas business, where federal legislation and potentially state legislation could be supportive, in particular, around continuing to invest in biogas, renewable gas, options like that, in addition to what we're seeing in the Build Back Better plan around hydrogen," Vegas said.

Along with NIPSCO, which serves natural gas distribution as well as electric customers in Indiana, NiSource operates natural gas utilities in five other states, all under the Columbia Gas name.

The Build Back Better Act and the $1.2 trillion bipartisan infrastructure bill, recently signed into law by U.S. President Joe Biden, "really create an opportunity to leverage the existing gas infrastructure" that today is used to carry methane to consumers and businesses, Vegas said.

"In the future, it could carry clean energy alternatives like hydrogen and renewable gas," Vegas added. "And so, the investments to develop and further do research and bring the cost down of those alternatives could be a game changer for the country around driving deeper decarbonization and achieving even higher sustainability goals."

NiSource sees the infrastructure bill, titled the Infrastructure Investment and Jobs Act, as a tailwind for the sector's transition.

The legislation contains more than $65 billion for power infrastructure, with nearly $29 billion devoted to the electric grid.

The larger, nearly $2 trillion Build Back Better budget reconciliation package includes new and extended clean energy tax credits, along with a direct pay option that provides cash payments in lieu of tax credits for renewable energy developers.

"That's an opportunity that gives us and others who are looking to build out our renewable fleets more flexibility to finance those plants and do it in a more cost-effective way," Brown said.

The company also believes it is important to take a cautious approach and look at "all the resource options that are out there" when it comes to achieving Biden's goal to decarbonize the U.S. power sector by 2035 and encourage economywide electrification.

"I think there definitely needs to be more of a balanced consideration as we drive toward the electrification goals that Biden has put out," Vegas said. "We look at it less as a target of electrification and more around the overall goal is to clean up the energy supply and energy consumption of the overall energy industry.

"Too much emphasis on just one [solution] underplays the complexity of what this energy transition really requires."