Energy Efficiency
Clean Electricity
Electrification
Resilience
Electric vehicle charging station with a green leaf symbol.

Low-Carbon Fuels

Advance the use of low-carbon fuels in the hardest-to-electrify end uses and to maintain a reliable electric grid.    

Today, fuels play a critical role in providing energy for transportation, heating homes and businesses, producing electricity, and powering our industries. These include gasoline, diesel, natural gas, biomass, propane, and other fuels. Most are fossil-based and emit greenhouse gases when combusted. In the Reference Scenario, which represents the least-cost scenario modeled, most fossil fuel consumption is replaced by clean electricity or low-carbon fuel consumption over time.

Zero- or low- carbon fuels are lower carbon intensity versions of fuels we currently use such as renewable diesel, natural gas, and propane, or fuels like hydrogen and ammonia that have the potential to expand their commercial use in Oregon.

These fuels are in limited supply today but will have an increasingly strategic role in powering applications where electrification is not currently feasible or cost effective. In the modeling, vehicle and building electrification was identified as a more cost-effective strategy than producing large volumes of low-carbon fuels to replace fossil fuels, while many industrial and agricultural sector applications were powered by low-carbon fuels because they can’t cost effectively or feasibly electrify.

Oregon will need to balance the increasing demand for these fuels and potential economic development opportunities with the potential impact to land use, natural resources, health, and life cycle emissions of production and delivery. Based on available data and technology projections, these fuels are expected to remain limited in supply and costly to produce. It will also be important to recognize the burden that may be placed on low-income, rural, and coastal households and businesses who may not have the same access to electrification and could be stranded/left behind to carry more of the cost of maintaining fuel infrastructure with fewer users.

While fuel volume is predicted to decline gradually over time, fuels remain foundational to providing essential energy services for the foreseeable future. For these reasons, it will be important to advance the use of low-carbon fuels over time in strategic sectors, including aviation, rail, and marine transport, long-haul trucking, agricultural and off-road equipment, and high-heat industrial processes, such as steel, cement, and chemical refining, as well as for power sector reliability.

Low-carbon fuels present a potential economic and resilience opportunity for Oregon to use waste feedstocks, such as woody biomass or biogas from municipal waste or wastewater facilities. These local energy sources can be distributed, used onsite, or stored to fuel local renewable energy generation or improve community resilience. These opportunities may create new revenue streams that can support community or municipal facility improvements. Improving the efficiency of how businesses and communities are using resources through measures such as industrial symbiosis can further capture opportunities to reduce emissions and increase competitiveness.

In the least cost pathway modeled in the Reference Scenario, fuel use across the economy declined by 70 percent by 2050.

Low-Carbon Fuels Policies

Each policy has a short-hand reference shown in italics used throughout the strategy.

4a

Foster development and expansion of low-carbon fuels and fuel infrastructure to serve the hardest-to-electrify sectors in Oregon as a strategic resource, while mitigating environmental and community impacts. (Low-carbon fuels and fuel infrastructure)

  • Low-carbon fuels, including liquid and gaseous fuels consumed for transportation, direct use, and electricity production, will play a growing role in Oregon’s economy as the state decarbonizes. The energy strategy modeling found that electrification in transportation and buildings is part of a least-cost pathway to decarbonizing the economy, but some applications will still need to be powered by fuels. In the least-cost pathway modeled in the Reference Scenario, fuel consumption dropped 70 percent by 2050, and most remaining fuels shifted from fossil to a low-carbon fuel.

    Low-carbon fuels and electricity are used in Oregon’s transportation sector today but only represent about 9 percent of annual consumption. Most low-carbon fuels consumed in Oregon are imported into the state and adoption is constrained by a limited supply. There is an insufficient source of low-carbon fuels to replace the fossil fuels we rely on today. Not all of Oregon’s communities have affordable access to these fuels as supply is focused on meeting demand in the urban areas along the I-5 corridor.

    Decarbonization in Washington and California will likely drive greater regional demand for low-carbon fuels. This may lead to increasing competition and potentially higher prices for these fuels, or simply a lack of availability in Oregon as limited supply is directed to Washington or California. Oregon has potential low-carbon waste biomass feedstocks from agriculture and forest management that could be used to produce low-carbon fuels and create an economic opportunity in rural communities. Encouraging the development of low-carbon fuels regionally will be important to help meet decarbonization needs, while development of in-state fuel production and distribution will help Oregon leverage economic opportunities in the state.

  • Oregon has existing policies guiding decarbonization of transportation and direct-use fuels but needs to develop new policies around fuel infrastructure development to ensure fuel supply access and program success. Oregon’s Clean Fuels Program and the federal renewable fuel standard support clean fuels development.

    To evaluate the potential of renewable natural gas production, the Oregon Department of Energy conducted a Biogas and Renewable Natural Gas Inventory Report in 2018 to identify fuel feedstocks and locations around the state. Natural gas utilities have also been encouraged to incorporate biogas into their fuel mix with voluntary biogas goals. Biogas collection facilities have been sited in Oregon but most of the fuel produced is used onsite or the environmental benefits are sold out of state.

    Oregon joined Washington and other public and private partners in the region in creating the Pacific Northwest Hydrogen Hub to create a test bed for renewable hydrogen infrastructure in the northwest, winning a $1 billion federal investment. Changing priorities at the federal level have currently canceled this funding opportunity but there is interest in fostering renewable hydrogen or other low-carbon fuel opportunities to power the hardest to electrify applications.

    With a growing demand for low-carbon fuels, complementary policies are needed to facilitate fuel production in Oregon and help ensure low-carbon fuels are available to support targeted deployment in strategic sectors.

    • While the limited amount of fossil and biofuel production in Oregon has led to economic dependence on other states, it also shielded Oregon communities from some of the environmental and social impacts associated with producing these fuels.

      • New low-carbon fuel production facilities offer jobs and economic development but they may also add air, water, and noise pollution to communities. Identifying existing brownfields for potential development may mitigate some environmental harms of new development but may also continue historic negative health and social impacts on vulnerable communities located near industrial sites.

      • It will be necessary to intentionally reduce barriers to participation for those communities so they are able to meaningfully engage in conversations and decision-making processes.

    • Biofuels are made from organic materials or biomass and are the most beneficial when produced from agricultural, municipal, and wood waste feedstocks instead of from crops grown for energy.

      • Oregon has abundant forest resources that can provide wood waste as a feedstock for fuel production and the collection of wood waste through forest management can reduce wildfire risk and support rural economies, but these resources are widely dispersed and can be challenging to efficiently collect at a cost-effective scale.

      • As demand for fuel increases and competition for waste feedstocks increases, there is a risk that non-waste feedstocks could be used, potentially leading to deforestation, habitat loss, and farmland being used to produce energy crops rather than food.

      • The need for expansion of energy infrastructure and resources needs to be balanced by the potential negative impacts to natural resources, wildlife, and the health of local communities.

    • Investment in low-carbon fuel production facilities carries risk as some of these fuels, such as hydrogen or ammonia, are nascent technologies with limited existing production and distribution infrastructure, resource tradeoffs, and health and safety concerns.

      • Some low-carbon fuels may also be considered transitional as they provide an immediate decarbonization solution but may be phased out over time with advancements in electric or other fuel options.

      • Low-carbon fuels are more expensive to produce than petroleum fuels and are dependent on government subsidies and tax credits to be competitive in the fuel market. Federal and state policies may change over time, and that can have a dramatic effect on the demand for and the economics of these fuels.

      • Technologies and the best applications of these fuels are also evolving and uncertain, creating a need for the state to track and share industry innovation.

    • Increasing fuel production in Oregon has potential social, environmental, and economic risks as well as benefits to decarbonization and economic growth and independence.

      • Oregon needs to evaluate the options and develop a comprehensive approach to attracting fuel production in the state while mitigating negative effects, evaluating fuel life cycle emissions and preventing unintended consequences.

4b

Support low-carbon fuel adoption in the hardest-to-electrify sectors including aviation, rail, marine transport, long-haul trucking, agricultural and off-road equipment, high-heat industrial processes and resources that support electric system reliability. (Low-carbon fuels adoption)

  • Shifting demand from fossil to low-carbon fuels in transportation and industry may require technical guidance and financial support from the state. Drop-in fuels or those that can be used in existing equipment and fuel storage are the easiest to adopt but some fuels and applications will require equipment retrofits and/or a change in how fuels are consumed.

    In the least-cost pathway modeled in the Reference Scenario, by 2050 most industrial processes were powered by low-carbon gas from biogenic sources or low-carbon hydrogen where electrification of applications was not cost-effective or feasible.

    • In transportation, the energy strategy model indicated that low-carbon fuels were needed to decarbonize aviation, rail, and marine transport as well as some long-haul trucking and agricultural and off-road equipment.

    • In the electricity sector, while less gas overall was burned over time across the scenarios, the system relied on existing fossil and new low-carbon gas facilities in Oregon operating at low capacity factors to provide system flexibility and reliability.

    To achieve this shifting demand in how we use fuels and what fuels we do use will require clear and early direction from the state so Oregon businesses and communities have time to prepare. Businesses and communities may need information in accessible language, so they are able to be prepared and participate in decision-making processes. State government can support this transition through research, technical guidance, and resources.

  • Oregon’s fuel decarbonization policies are focused on reducing the emissions of fuels used in transportation and direct use but are limited in their support of consumers and industries that need to make the energy transition. The Clean Fuels Program aims to reduce the carbon intensity of Oregon’s transportation fuels over time. The Climate Protection Program establishes a declining limit on greenhouse gas emissions from fossil fuels used throughout Oregon, including diesel, gasoline, and natural gas, out to 2050. Support is needed to drive implementation of these programs, including overcoming cost, information gaps, and technical barriers, as well as expanding the availability of low-carbon fuels in Oregon.

    While some low-carbon fuel solutions such as renewable diesel, biodiesel, and ethanol are in use in transportation today, others like hydrogen and ammonia are not yet at market scale. These may be viable solutions in the future, and the state can help Oregon businesses vet the opportunity by tracking their commercial development, determining the best uses for Oregon consumers, identifying opportunities to integrate them into Oregon’s energy system, and evaluating the state’s role in securing access.

    Existing policies do not offer clear direction around a decarbonization pathway or timeline for fuel applications like maritime, aviation, and rail transportation fuels. These transportation categories and other fuel applications without clear direction may benefit from state policies such as fuel decarbonization targets or support, allowing Oregon businesses to plan for the transition and begin to secure regional low-carbon fuel supply. Sectors that are covered by policies with direct regulatory decarbonization goals, such as energy-intensive trade-affected industries (in the Climate Protection Program) and commercial buildings (in the Building Performance Standard program) face technical, informational, and financial barriers as they transition how they use energy. There are opportunities for the state to offer research, technical, and financial assistance to support the transition and help Oregon businesses decarbonize successfully while remaining competitive.

  • Decarbonization of fuels, electrification, and increased energy efficiency have the potential to reduce operating costs and offer savings for Oregon businesses over time but the initial investment and potential increased risk are significant hurdles for most businesses.

    Increased adoption of low-carbon fuels may pose economic, technological, and social risks, and policies must be structured to understand and help navigate these risks. Adopting low-carbon fuel technologies may require significant upfront capital, and use of low-carbon fuels may lead to higher costs, making it more difficult to compete outside of Oregon or leading to higher costs for consumers and businesses. Shifting federal policies creates additional risk and uncertainty. There is a limited supply of low-carbon fuels, which means Oregon businesses may be competing for access to the fuels unless new production comes online in Oregon and the region. Onsite generation and storage of fuels such as renewable hydrogen may be a viable option but will require a greater initial investment, may potentially pose new safety hazards, and increase dependence on access to resources such as feedstocks or water.

    Developing and scaling up new technologies and fuels requires continuous innovation, investment, and overcoming knowledge and technical limitations in energy efficiency and storage. Existing infrastructure may need to be retrofitted or replaced, consumer behavior and manufacturing processes may need to change, and workforce training may be needed.

4c

Support a managed fuels transition that minimizes stranded assets as end-uses electrify, identifies opportunities to leverage existing infrastructure and expertise to support clean fuel alternatives, and encourages technological innovation to advance new opportunities. (Managed fuels transition)

  • Transitioning existing fuel consumption to electricity and low-carbon fuels is an important component of a least-cost pathway to decarbonizing transportation and buildings — but the transition poses challenges for existing fossil fuel suppliers and customers, as well as for power system resilience and reliability.

    Liquid and gaseous fuels play an important day-to-day role as a foundational resource for building heating, commercial and industrial processes, and electricity generation. They are also critical to disaster recovery, wildfire response, and as a backup energy supply. Emergency management operations are currently designed to take advantage of the ability of petroleum-based fuels to be stored and mobilized quickly during emergencies.

    Shifting energy use from the existing natural gas system to the electricity system as well as growing demand from new loads will require expansion of clean electricity generation, transmission, and storage infrastructure. Rapid expansion of Oregon’s electricity system will be challenging and there will remain a need for on-demand resources like natural gas to provide support as energy resources and demands fluctuate.

    Fossil fuel applications in buildings and transportation will need to electrify to meet decarbonization targets on a least cost path. This will lead to a gradual decline in end-users, leaving fewer remaining customers to cover the costs of the fuel and maintaining the existing fuel distribution system. Oregon’s energy system will still be dependent on petroleum fuels but as consumption volumes decline it may be more challenging for fuel suppliers to remain economically viable and still provide service. It is important to consider the state’s role in managing this risk, guiding gradual change while supporting innovation, and capturing opportunities to repurpose existing infrastructure for low-carbon fuels or other energy applications.

    Managing this transition requires a recognition of the role of strategic electrification in decarbonizing buildings, industry, and transportation as a cost containment approach while balancing the reality of Oregon’s current dependence on fossil fuels. The transition will require policy and strategic support from Oregon’s Legislature, state agencies, and fuel providers to spur the energy transition in a way that addresses the effects of declining fuel demand on distribution systems over time. Electric and natural gas utilities will need to share data and planning information to ensure system resilience and infrastructure cost containment.

    Additional solutions may include:

    • Retrofitting or repurposing existing infrastructure to support low-carbon fuel adoption in the hardest-to-electrify end uses and electricity generation.

    • Investment in new infrastructure that uses waste feedstocks or other Oregon resources to produce fuels such as ammonia, renewable natural gas, and renewable hydrogen.

    Before investing in new fossil fuel distribution infrastructure, Oregon should consider alternative solutions - such as investment in efficiency and electrification to mitigate the risk of stranded assets, weigh resilience benefits, and plan for a transition to a low-carbon fuel alternative over time.

    Finally, it is important to explore how to use existing fuel supplier expertise and infrastructure to help deliver deeper carbon reductions through new approaches, such as through construction and management of thermal energy networks and capturing geothermal or industrial waste heat with the potential to serve multiple buildings and even entire neighborhoods.

  • A managed energy transition will not happen alone. The economywide interactions between sectors are not captured by the planning of any single entity and cross-fuels coordination will be needed to support resource adequacy and reliability during the transition. State policy is needed to balance the risk of investment in resources or infrastructure that may become obsolete or uneconomical to operate due to changing energy demands — for example, paying for upgrades on a distribution line to a community with declining natural gas consumption over time.

    Absent explicit policies and analysis, it can be challenging to predict changes in consumer demand that could result in much higher natural gas costs for customers remaining on the distribution line. During this transition, non-pipe solutions such as energy efficiency or electrification as an alternative to new distribution infrastructure could reduce the risks associated with large investments. This will require a data-driven approach, regulatory guidance, and collaboration with Oregon communities. California, for example, is deploying several pilot projects to test strategies to manage the shift to electric end-uses in buildings by focusing electrification initiatives in areas where the gas distribution network is in need of upgrades. It will also be important to consider policies that support innovation, leveraging expertise from the oil and gas sectors to support low-carbon fuels and other technologies like district heating and enhanced geothermal power generation.

  • Decarbonizing fuel applications by transitioning from petroleum fuels to electricity or an alternative low-carbon fuel has a variety of short term economic and social risks. In the long term, it is clear that mitigating climate change and reducing Oregon’s dependence on finite imported petroleum fuels is beneficial. In the short term, the transition will require significant investments in new infrastructure and there will be risk associated with investing in nascent technologies and fuels. Not all consumers will be interested in transitioning to new fuels or changing how they use energy. Tribal and public engagement will be important to a successful transition.

    A declining customer base for the existing fuel distribution networks is likely to raise costs for the remaining customers, elevating affordability, equity, and environmental justice concerns for those customers unable to afford switching to efficient electric technologies. It will be important to apply a strategic electrification approach to reduce and mitigate effects on environmental justice households and communities, and for policies to reduce risks of stranded assets. Some industrial users in Oregon may continue to use natural gas for their operations and/or as a backup power source because there isn’t an affordable or viable alternative, but they may be subject to increasing fuel costs. Fuel suppliers may gradually lose customers but will need to remain viable where they are providing a critical service to Oregon’s energy system. It will be important to mitigate the risks of relying on new markets for new fuels and technologies during the transition.