We’ve been hearing more in recent years about how methane is particularly toxic for the planet. When released into the atmosphere, it traps dozens of times more heat than carbon dioxide. Yet a new group of companies is gaining policymakers’ attention with a green business model based on making . . . more methane.

For today’s newsletter, I dived into the world of synthetic natural gas (SNG), also known as e-methane (methane is the main component of natural gas). Drilling well sites are a major point of methane leakage in the natural gas supply chain, and SNG producers say they can avoid those emissions, since they produce the fuel under controlled conditions.

Proponents say SNG could be a drop-in replacement for fossil natural gas. But even if costs come down and leaks can be avoided, will swapping in a synthetic version of natural gas lock us into existing energy systems, and their associated risks? Read on.

synthetic natural gas

Natural gas is a leading contributor to the climate crisis because of the CO₂ it releases when burnt and the leaks that can occur throughout the supply chain. Many climate advocates urge that we should reduce our use of the fuel as quickly as possible.

But a new crop of start-ups are taking a very different tack: using hydrogen to produce synthetic natural gas, which they said could supply demand for the fuel with a greatly reduced impact on the climate.

Belgium-based hydrogen company Tree Energy Solutions (TES), whose investors include HSBC and UniCredit, last month launched a global coalition promoting synthetic natural gas. Members of the group include France’s TotalEnergies and Engie, US energy exporter Sempra Infrastructure and four Japanese energy companies, including Mitsubishi.

Turn2X, a Munich-based competitor, has just opened its first synthetic natural gas plant in Miajadas, Spain.

And California-based Terraform Industries, founded in 2021, has raised $11mn for an entirely off-the-grid model for synthesising natural gas, founder Casey Handmer told me, powered exclusively by solar energy. Terraform is backed by tech founders including former GitHub CEO Nat Friedman, entrepreneur Daniel Gross, and Patrick and John Collison, co-founders of the payments company Stripe, Handmer said.

How it works

The companies plan to make synthetic natural gas by combining captured carbon dioxide with green hydrogen to produce a so-called carbon-neutral fuel that can be distributed to consumers through existing natural gas infrastructure.

Whereas Turn2X and Terraform are focused on supplanting natural gas, TES also aims to use synthetic natural gas as a “hydrogen carrier”. When SNG shipments arrive in Europe, TES plans to split some of the fuel back into its component parts — hydrogen and carbon dioxide — and capture them separately. Customers in heavy industry could then use the hydrogen in applications such as steelmaking.

The strategy allows TES to produce SNG in countries with cheaper renewables including the US and Saudi Arabia, said Marco Alverà, chief executive of TES, who added he was in the business of “exporting the sun of Texas into Germany”. The company is developing a production unit with TotalEnergies in Texas, which stands to benefit from subsidies in the US’s Inflation Reduction Act.

Using SNG to transport hydrogen, however, is more expensive than alternative energy carriers such as green ammonia, in part because of the cost of the hydrogen “reconversion” step, according to German think-tank Agora Energiewende.

Turn2X’s modular production model could scale in sunny Italy, Greece, and Portugal, to avoid the hassle and costs of shipping, co-founder Benedikt Stolz said.

Obstacles ahead . . .

The liquefied natural gas market is booming with Europe’s natural gas import prices back to pre-energy crisis levels. So how do synthetic gas producers, using still-scarce green hydrogen and captured CO₂, plan to compete with the cheapest commodity fossil fuel?

Alverà said they did not have to. While he believed synthetic natural gas would eventually be cheaper than European LNG imports, he said, TES was planning ahead for a world that would phase out fossil gas and boost demand for e-fuels with mandates and subsidies. The company pointed to Japan, where city gas utilities had set a target of using 90 per cent SNG by 2050.

“All we’re trying to do is, within that world of e-fuels, trying to pick who the winners are,” Alverà said.

Another challenge is that if synthetic natural gas leaks, it is just as bad for the planet as a molecule pulled from the ground in Texas or Qatar. Producers said that this was less of a risk, however, since SNG was produced under controlled conditions. Alverà said that TES would voluntarily track and disclose any leaks.

But even if leaks could be monitored and minimised, climate experts warned that synthetic natural gas could delay the energy transition by using scarce molecules of green hydrogen for applications that could instead be electrified.

Talk of hydrogen as a “Swiss army knife” with sweeping applications has lately been replaced by plans for “surgical” use in hard-to-decarbonise sectors, Oleksiy Tatarenko of climate consultancy RMI said. The rule of thumb, he said, was “everything that can be directly electrified should be”.

That would rule out the use of hydrogen-derived fuels for heating buildings. TES and Turn2X both downplayed this end use — “heating homes isn’t really the focus area”, Stolz told me. But using synthetic natural gas as a drop-in replacement for the natural gas currently used across Europe is a big part of its appeal to policymakers.

Others don’t see the appeal at all. “This is a terrible idea, full stop,” Rebecca Dell, who directs the industry programme at non-profit foundation ClimateWorks, said of synthetic natural gas, calling its proposed use in existing distribution networks “energetically incoherent”.

“And if you got your hydrogen from methane that was derived from hydrogen, talk about a self-licking ice cream cone,” she added.

Some fear that increased reliance on synthetic natural gas, pitched as a stop-gap, could lead to lock-in of existing infrastructure.

“The danger is that you scale synthetic methane for applications that can pay a green premium, and sell the promise that in the future, it will be so much cheaper that you can also use it for domestic heating,” said Gniewomir Flis, a hydrogen expert at Kaya Partners. And, he added, distribution system operators might pull back on their power grid investments, anticipating greater reliance on synthetic gas.

. . . but support is still growing

Despite concerns, momentum behind synthetic natural gas may be growing. In March, investors approved a land-based LNG import facility in Germany: the Hanseatic Energy Hub in Stade, which was branded “future-flexible”, with marketing materials emphasising that it would import not only LNG but also synthetic natural gas.

And, earlier this year, Turn2X had the ear of top EU policymakers, including German economy and climate minister Robert Habeck and European Green Deal leader Maroš Šefčovič, in a meeting at the Munich Security Conference.

The company’s presence at that forum is revealing. Political leaders increasingly emphasise that the green transition is a matter of energy security and lessening reliance on petrostates — not just a bid to save the planet. Yet, if synthetic natural gas shipped from the US and the Middle East takes off, the green transition might have less effect than advertised on global energy flows.

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