What are the clean fuels pathways for the Northwest in a net-zero economy?
The need for clean fuels is more acute in the Northwest than in other parts of the United States. With a relatively clean grid due to hydroelectric resources, the Northwest cannot achieve significant emissions reductions from cleaning the electricity grid. That fact, combined with Washington State’s aggressive 2030 emission reductions target, drives the need to decarbonize fuels earlier than in other regions.
To achieve deep decarbonization, economies must lower the carbon intensity of liquid and gaseous fuels by producing alternative clean fuels, which include hydrogen, ammonia, biofuel, and drop-in synthetic hydrocarbon electrofuels, produced with the Fischer-Tropsch process in this analysis.
The Inflation Reduction Act (IRA) provides significant incentives for clean fuel production, making it more economic to meet Washington’s 2030 emissions target in the NZNW Energy Pathways analysis than in past studies prior to the passage of the IRA.
By 2050, the supply of liquid fuels is fully decarbonized, and the remaining gas is almost fully decarbonized, with remaining emissions balanced by carbon capture and sequestration, and measures to increase the land sink for carbon.
The NZNW Energy Pathways analysis modeled six scenarios to explore trade-offs among clean fuels, with the following key takeaways:
By 2050, the supply of liquid fuels is fully decarbonized with electrofuels and some ammonia, and almost all gaseous fuels are clean hydrogen or biofuels.
Captured carbon becomes a valuable commodity in a net-zero economy because it is used to produce clean drop-in synthetic hydrocarbon fuels.
IRA incentives for renewables, hydrogen production, and carbon capture mean that hydrogen production is economic by 2030 and is produced in large quantities in Montana.
The ability to import clean fuels from other states lowers costs by taking advantage of higher-quality resources and increases the feasibility of reaching emissions goals.
Please see NZNW Clean Fuels Results for a full discussion of the assumptions, modeling, and impact on liquid and gaseous fuels with achieving net-zero emissions by 2050 in the Northwest. Learn more about the Green Electrolytic Hydrogen Pathways Infographic (linked above) on the CETI blog.
Liquid Fuels Fully Decarbonized and Remaining Gas Nearly Fully Decarbonized by 2050
In 2021, both the liquid and gaseous fuel supply are mostly fossil fuels. Gaseous fuel demand declines significantly as natural gas use in buildings, industry, and gas-produced electricity decreases. In the near term, clean liquid fuels demand in 2030 is met partially with Fisher-Tropsch liquids and partially with biofuels.
In 2030, the rest of the country does not need clean fuels to meet their emissions target. Existing fatty acid methyl ester (FAME) biodiesel production nationwide is therefore diverted to the Northwest. However, to the extent that existing FAME biodiesel usage is not flexible and therefore diversion is not possible or only partially possible, emissions reductions in the Northwest would be met with alternative means, including additional electrolysis and Fischer-Tropsch liquids, and/or increased carbon capture and storage.
By 2050, gaseous fuel demand is met almost entirely with biofuels and hydrogen, which are used in end-use applications for remaining gas demand in commercial and residential appliances, and hydrogen in transportation, industrial boilers, and bulk chemicals production.
Demand for liquid fuels also decreases significantly, and by 2050 the remaining liquid fuel demand is mostly met with Fischer-Tropsch liquids, used in vehicles and aviation, and some ammonia, used in maritime shipping.
The visualization below shows how demand for fuels, shown in exajoules (EJ), shrinks over time as the Northwest economy meets more energy demand with electricity instead of fuels.
IRA Hydrogen and Derived Products Economic by 2030
Hydrogen can either be consumed locally in end uses or used in conversion to other fuels via Fischer-Tropsch or Haber-Bosch processes, producing Fischer-Tropsch liquids and ammonia respectively. If not used locally, hydrogen can also be exported elsewhere.
Production of hydrogen through electrolysis is extremely electricity intensive, and due to Montana’s high-quality renewable resources (largely onshore wind), the analysis shows co-located production of hydrogen and subsequent clean fuels with these renewable resources.
Most of the hydrogen produced in Montana is exported to end uses in Washington, Oregon, and south to Wyoming. Idaho acts as a pass-through hub to send hydrogen from Montana to the coastal states, which is why the visualization below shows that most of Idaho’s supply of hydrogen is imported and most of its demand for hydrogen is exports.
The IRA—particularly the tax credits for hydrogen, renewables, and carbon capture—makes investment in electrolyzers, and the production of hydrogen and derived products, economic by 2030 in this analysis. IRA incentives for carbon capture lower the cost of carbon needed to produce electrofuels, making electrofuels more economic and driving additional hydrogen production.
The level of investment in hydrogen infrastructure will not be constrained by economics. Instead, it will depend on the rate at which electrolyzers, hydrogen storage and transport, fuels conversion infrastructure, renewables, and new markets for hydrogen can scale. These factors will be limited by labor; supply chains for materials and technology; siting and permitting of renewable resources, transmission, and pipelines; and the emergence of new markets for hydrogen.
New hydrogen markets will depend on either the development of conversion infrastructure to produce drop-in fuels—such as Fischer-Tropsch liquids replacing diesel and jet fuel—or the replacement or retrofits of demand-side technologies—such as switching from gas to hydrogen boilers in industry or from fuel oil to ammonia-fueled engines in maritime shipping.
Capturing Carbon Critical to Developing Clean Fuels
Carbon capture or removal technologies supply carbon either for producing clean drop-in synthetic hydrocarbon fuels or for sequestration to offset emissions.
The NZNW Energy Pathways model permits states to count carbon sequestration they pay for in other states toward their own emissions offsets. For example, carbon captured and sequestered in Montana could count toward offsets for other Northwest states that lack the geological formations for sequestration.
Cost efficiency increases since states can pay for carbon sequestration in places where low-cost carbon capture and sequestration is available. Montana is again a good example, where sequestration potential exists next to abundant and high-quality wind resources that can be paired with DAC.
Modeled sequestration potential in this analysis comes from the National Energy Technology Laboratory (NETL)’s CO2 Saline Storage Cost Model, which looks at the potential to store carbon dioxide in saline aquifers. This does not preclude the opportunity for sequestration in other types of formation, and future studies may include potential for additional sites when more information is available.
States without geologic sequestration options use carbon dioxide for production of Fischer-Tropsch liquids, and what isn’t used to produce clean fuels gets exported for sequestration elsewhere.
Requiring Clean Fuels to be Developed Locally Strains the Energy System
The visualization below shows that if clean fuel exports are not permitted, electrolysis and the associated electricity needs decrease in Montana and increase in other Northwest states, particularly Washington.
Washington sees significant increases in both electricity system capacity and conversion capacity. Conversion processes include hydrogen electrolysis, as well as Fischer-Tropsch and Haber-Bosch to convert hydrogen to electrofuels and ammonia, respectively.
Compared to the Core Case, requiring local clean fuels leads to an additional 40 GW of electricity capacity in the Northwest and an additional 19 GW of electrolyzers in Washington by 2050. Washington also experiences reductions in gas-powered electricity capacity as the flexibility of more electrolysis provides additional balancing. In Montana, there is a decrease in both conversion capacity and the electricity system, reducing onshore wind capacity by 16 GW by 2050 compared to the Core Case.
Requiring local clean fuels production strains the energy system. Hence, allowing fuel markets beyond state borders increases the feasibility of reaching emissions goals.
Clean fuels play a critical role in Northwest decarbonization pathways, and early action is needed to support their development to ensure that by 2050, the liquid fuel supply is fully decarbonized.
By 2030, action is needed to support clean fuels development, especially to meet Washington's 2030 emissions targets. The Northwest should also establish standards for importing clean fuels and policies for crediting out-of-state DAC and sequestration. Lastly, the region should grow demand for direct hydrogen in heavy-duty transportation and industrial sectors to keep up with the increased supply that the IRA is incentivizing, and direct that supply to productive uses.
By 2040, the region should establish an implementation policy to ensure that the infrastructure developed under the IRA continues to produce clean fuels and the region remains on a trajectory to achieve its emissions reduction targets.