The most affordable, reliable, and resilient paths to decarbonizing California's economy would rely on a clean fuels network to back up building and vehicle electrification and renewable power penetration, according to a new analysis by Southern California Gas Co.

The clean fuels network would deliver low-carbon hydrogen, renewable and synthetic natural gas, and biofuels to end-users throughout the coming decades, even as the electric grid meets a growing share of California's energy demand, SoCalGas said. Building that network will require legislators to send clear policy signals and would come at significant cost — though the analysis showed it would also generate savings for customers, compared with an all-electric approach.

The analysis comes as decarbonization efforts have disrupted the traditional gas utility model in California. More than 50 California cities, towns, and counties have restricted gas use in new construction. Meanwhile, SoCalGas has taken a leading role in stimulating hydrogen supply and demand.

Electrification seen working alongside clean fuels

To assess California's options for meeting its goal to become carbon neutral by 2045, SoCalGas evaluated the benefits of four scenarios. In one, California aggressively electrifies end uses but relies on clean fuels for backup. In two others, clean fuels consumption is more robust in the building and transportation sectors — though carbon sequestration is not allowed in one of those scenarios. In the final model, California entirely abandons its fuel distribution system.

The first three options would minimize challenges to maintaining reliability through the energy transition and save customers $45 billion to $75 billion in avoided costs through 2050, compared with the no-fuels approach, according to the analysis.

SoCalGas showed in the analysis that it recognizes what other energy system analysts have concluded: In a decarbonized world, natural gas alternatives such as hydrogen, biogas and synthetic natural gas are likely to play a relatively marginal role in supplying building heat.

In each of the four scenarios that SoCalGas modeled as part of the study, 55%-95% of buildings would rely on electric power for space heating by 2050. By 2035, 50%-100% of appliances sold in the state would be electric-powered.

"We support building decarbonization," SoCalGas President Maryam Brown told reporters during an Oct. 26 press conference. "And electrification is an important tool in decarbonizing buildings."

However, Brown stopped short of supporting building gas bans. SoCalGas believes it is better to avoid a "patchwork" of greenhouse gas regulations, and that prohibiting infrastructure "doesn't seem to make common sense," Brown said.

Benefits and costs of clean fuels network

According to the study, a clean fuels network would facilitate decarbonization of hard-to-electrify sectors, such as industry, heavy-duty transportation and aviation. It would provide backup to variable renewable power generation by allowing combustion of low-carbon gas alternatives, the company concluded.

The clean fuels network would still require substantial investment through 2050: roughly $10 billion for hydrogen production; another $10 billion to deploy hydrogen vehicle refueling stations and fuel cells; $35 billion to upgrade current pipelines and build new hydrogen-dedicated lines; and $5 billion for pipelines to facilitate CO2 management.

Policymakers can support development by establishing standards for procuring and blending clean fuels, as well as by modernizing rate structures and energy efficiency programs, SoCalGas said. They should also support investment in infrastructure; research, development and demonstration; and carbon capture, utilization and sequestration, the report found.

The study embraced a relatively more expansive adoption of low-carbon fuels than many environmentalists support.

An emerging consensus among climate activists holds that hydrogen should only be produced from zero-carbon renewable power, whereas SoCalGas' analysis envisions some uptake of blue hydrogen, produced from natural gas using carbon capture. Green groups also typically advocate for very narrow uses of hydrogen and renewable natural gas, whereas many companies and the U.S. government envision a wider array of end uses.