Feasibility Assessment of U.S. E-gas Exports to Japan

Provisions in the U.S. Inflation Reduction Act (IRA) strongly incentivize clean energy production, including subsidies for low-carbon hydrogen production and carbon capture utilization and sequestration. These provisions could alter the economics of clean fuel production for domestic use as well as export. Methane derived from CO2 and low-carbon hydrogen, typically referred to as e-gas or e-methane, is one such clean fuel — a low-carbon alternative to fossil-based natural gas. This project develops a feasibility study to evaluate the resource potential and levelized costs of producing U.S. e-gas, synthesized from biogenic CO2 captured from existing ethanol plants and low-carbon hydrogen sourced directly from renewable electricity, for export to Japan. The study uses insights from prior modeling with EPRI’s U.S. Regional Economy, Greenhouse Gas, and Energy (US-REGEN) model, supporting LCRI. This study estimates an upper bound on the amount of e-gas that theoretically could be produced using available biogenic CO2 from ethanol plants, as well as the amount of hydrogen (and electrolysis) required to support this level of e-gas production. A levelized cost analysis was developed for a range of scenarios of e-gas production that primarily vary in the location of hydrogen production, e-gas synthesis and fuel/products transport. Results based on current ethanol production levels suggest a total U.S. e-gas potential of 15.6 million metric tons per year (770 tbtu per year, based on higher heating value) with levelized costs that could vary between $1.1 and $1.5 per kg ($23 - $30 per MMBtu) e-gas. Hydrogen production costs (driven by electrolyzer costs) and synthesis costs strongly impact the estimated levelized costs. The amount of hydrogen required to support this level of e-gas production, 9.8 million metric tons per year (1,100 tbtu per year, based on lower heating value), is equivalent to current levels of U.S. annual hydrogen production and may require 80 GW or more of new wind resources. This study also provided additional context on several factors that could affect the feasibility of e-gas production, including a) sensitivity analysis around e-gas synthesis costs b) existing natural gas pipeline utilization c) pathways of future biofuel production d) uncertainty around IRA incentives and e) siting and permitting challenges for new infrastructure.