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Doing something more valuable with natural gas’: CPS Energy announces hydrogen pilot

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July 22, 2025

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CPS Energy has partnered with clean energy startup Modern Hydrogen to pilot a project that converts natural gas into clean hydrogen for power generation.

“This is about doing something more valuable with natural gas,” Modern Hydrogen CEO Tony Pan told Power Engineering in an interview on Tuesday.

San Antonio’s municipal utility will deploy Modern Hydrogen’s methane pyrolysis technology, which uses heat to transform methane from natural gas into hydrogen and solid carbon.

Unlike traditional methods such as steam methane reforming (SMR), which generate CO₂ as a byproduct, Modern Hydrogen says its modular MH500 unit uses methane pyrolysis to extract solid carbon from natural gas at the point of use, preventing CO₂ from forming in the first place.

“We don’t need an external supply of electricity to run this process,” said Pan. “As we produce the clean hydrogen, we siphon a portion of it off and burn that to produce the clean heat needed to run pyrolysis.”

Each MH500 unit yields approximately 500 kg of hydrogen per day onsite, according to the company, enabling fueling for power generation, fuel cell-powered vehicles, or blending with natural gas systems.

CPS Energy has not made a final decision on where to use the hydrogen, but it is expected to be used at one of the utility’s natural gas-fired plants. Pan told us the plant would use less than a 20% hydrogen blend, but the exact ratio hasn’t been determined. The captured solid carbon would be reused in products like asphalt for infrastructure projects.

The biggest obstacles to hydrogen’s use at scale in power generation include building new infrastructure and ramping up supply. Building an extensive hydrogen pipeline network would take years and cost billions of dollars. There are only roughly 1,600 miles of hydrogen-dedicated pipelines in the U.S., virtually all concentrated in Texas and Louisiana, where there is petrochemical and other industry activity.

In Modern Hydrogen’s methane pyrolysis solution, the company claims it has found a workaround.

“[It] seems way more elegant to reuse existing infrastructure than to build a new hype infrastructure for the hydrogen grid,” said Pan.

In partnering with Modern Hydrogen, CPS Energy becomes one of a few utilities in the nation to pilot distributed natural gas pyrolysis technologies and carbon capture.

“By exploring this innovative opportunity to produce clean hydrogen using our existing natural gas system, we are moving forward on our commitment to deliver reliable, affordable, and cleaner energy for our community,” said CPS Energy CEO Rudy D. Garza.

Modern Hydrogen has two other existing pilot projects that are smaller in scale, per Pan. One pilot, focused on clean, distributed power generation, is located in Florida at an undisclosed manufacturing facility. In this project, hydrogen is produced onsite and fed directly into a generator to produce electricity. In a non-power generation use case, Modern Hydrogen is partnering with Oregon’s NW Natural to blend hydrogen into the natural gas distribution system.

Modern Hydrogen is based in Seattle, Washington. The company says its investors include the likes of Bill Gates, NextEra Energy and National Grid.