In the race toward a sustainable future, hydrogen has emerged as a star player in the global clean energy transition. Among the companies embracing this transformative shift are NiSource Inc. and Sempra Energy, which are taking proactive steps to harness the potential of hydrogen as a key driver of a greener energy landscape.
NiSource just launched a multi-phase hydrogen blending project; it’s a pioneering project in the U.S. to use a blending skid in a controlled environment to combine natural gas and hydrogen at precise levels. The goal is to find out the best blend percentages and their benefits for consumers and the planet.
Taking the same direction, San Diego-based Sempra Energy, will also test electrolytic hydrogen blending into existing natural gas infrastructure. The energy giant is also working on what could be the nation’s largest green hydrogen energy infrastructure system.
NiSource Hydrogen and Natural Gas Blending
NiSource envisions the potential for substantial investments in hydrogen production, transportation, and storage. It comes following the conclusion of its current five-year $15 billion capital plan in 2027.
To make that vision a reality, NiSource is developing its capacity to handle hydrogen safely and efficiently. It also seeks to show to policymakers that low-carbon hydrogen can effectively decarbonize gas utility services.
Several hydrogen projects have been announced in the U.S., encompassing different areas of application.
NiSource pilot project, led by its subsidiary Columbia Gas of Pennsylvania Inc., will test a 20% hydrogen blend in natural gas distribution infrastructure. It facilitates the regulated blending of hydrogen into Safety Town’s natural gas system at varying concentrations.
The results of this project to be tested in Monaca, Pennsylvania will be key to demonstrate that hydrogen blending is feasible. The project is a collaboration between NiSource’s Columbia Gas and EN Engineering.
- Together, they’ll create a blending skid that will inject hydrogen into the gas stream at different percentages, from 2% – 20%.
The project will also assess the impact of various blending concentrations on different gas appliances through a model home. The goal is to ensure the proper functioning of equipment and to know if any adjustments on processes are necessary.
NiSource prioritizes safety and regulatory compliance in hydrogen blending. They will share data with the US Pipeline and Hazardous Materials Safety Administration for monitoring hydrogen-gas blends and their impact on pipeline materials.
Moreover, its other subsidiary, Northern Indiana Public Service Co. LLC (NIPSCO), plans to use a blend of gas and hydrogen to repower one of its turbines.
An Alternative to Electrification
In all these innovations, CEO Lloyd Yates emphasizes the importance of policies in incentivizing efforts driving the hydrogen transition.
He specified some federal tax credits and initiatives such as the Appalachian Regional Clean Hydrogen Hub (ARCH2). NiSource backed this application to secure a subsidy from the Energy Department’s funding program on setting up regional hydrogen hubs.
The Indiana-based utility aims to achieve net zero Scope 1 and 2 emissions by 2040. Hydrogen blending can further help the company tackle its elusive Scope 3 emissions, which are linked to customer’s gas use. Burning hydrogen as a fuel emits only water vapor, no greenhouse gasses given that it uses renewable sources.
NiSource said its hydrogen and natural gas blending strategy is part of their “Future of Energy” program. It particularly includes renewable energy and electrification strategies as well as renewable natural gas pathways.
Yates further noted that the project seeks to make hydrogen an alternative to electrification for customers facing financial challenges. It will allow them to reduce their carbon emissions without buying new appliances, thus making it a viable option.
Sempra’s Growing Sustainability & Hydrogen Innovation
Along with NiSource, other utilities like Sempra Energy are also exploring hydrogen projects to meet the nation’s clean energy goals.
With a strong focus on sustainability, Sempra pursues >20 hydrogen R&D projects to enhance grid resilience and promote decarbonization. It works with strategic research partners while providing funding worth $140 million in the last 2 years.
The funds are for research, development, and demonstration projects for cleaner fuels, hydrogen technology and infrastructure.
In particular, Sempra’s subsidiary Southern California Gas Co. (SoCalGas) partners with the University of California, Irvine on a demonstration project. They aim to show how electrolytic hydrogen can be safely mixed into the campus’ existing natural gas pipeline. Testing for this hydrogen-natural gas blending may start next year once approved.
The joint initiative aims to better understand how hydrogen could be delivered at scale through California’s existing natural gas system. It can either be for existing customers tapping at the grid or to produce clean electricity in zero-emissions fuel cells.
The testing project will use an electrolyzer to convert water into hydrogen for blending into the UCI campus gas grid. It will involve powering residential and light commercial equipment such as ovens, boilers, furnaces, and water heaters.
Initially, SoCalGas will use 5% hydrogen in the mix, aiming for up to 20%, the same as NiSource’s blending project. The ultimate goal is to also significantly reduce customer’s emissions from gas use.
The Missing Link in the Clean Energy Equation
SoCalGas announced its goal to reach net zero greenhouse gas emissions by 2045. That makes it the first large natural gas utility in the country to do so. Its parent company, Sempra, pledged to achieve net zero emissions 5 years later, by 2050.
The energy firm also proposed the Angeles Link, which could be the country’s largest green hydrogen energy infrastructure system. They refer to it as the missing link in the clean energy equation.
The initiative can potentially deliver cleaner energy to hard-to-electrify sectors such as heavy-duty transportation and industrial processes.
By replacing fossil fuel-powered trucks with hydrogen fuel cell trucks, Sempra Energy aims to eliminate up to 3 million gallons of diesel a day. This would result in displacing about 25,000 tons of carbon emissions each year.
First Hydrogen (TSXV: FHYD), a Vancouver and London-based company, specializes in zero-emission hydrogen fuel cell vehicles (FCEV) and green hydrogen production. Its innovation is a testament that FCEV works, with trial results beating test expectations.
NiSource and Sempra Energy’s initiatives in hydrogen blending exemplify their commitment to a sustainable energy future, reducing emissions while ensuring affordable and accessible solutions for consumers. If their efforts turn out successfully, they can show the significance of hydrogen in the clean energy transition.
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The accounting differences that decide whether your nature investment shows up in inventory, in BVCM, or nowhere at all.
The question reaches a procurement team about three weeks before the next sustainability committee meeting. Someone has read about insetting. Someone else has just signed off on an offset purchase. The CSO wants to know if the two are interchangeable. The answer is no, and the GHG Protocol Land Sector and Removals Standard is the reason why.
This article walks through what each term means at audit-grade specificity, what the standards actually say about how each gets counted, and how to decide which tool fits which target. The insetting vs offsetting question is one of the most-searched in corporate climate strategy, and one of the most poorly answered. By the end of this piece, you should be able to brief a committee on the difference without notes.
The two definitions, in plain English
Offsetting means buying carbon credits generated outside your value chain and retiring them against your residual emissions. The reduction happens somewhere else, financed by you, and the credit is the receipt.
Insetting means investing in emission reductions or removals inside your own value chain, typically with suppliers, where the reduction is directly linked to the products and services you buy. The reduction happens inside the boundary of your Scope 3 inventory, and the accounting treatment is fundamentally different.
The shorthand from the University of Oxford’s Nature-based Insetting Initiative is useful: insetting is what you do with the supply chain you have; offsetting is what you do with the supply chain you do not have.
What the GHG Protocol Land Sector Standard actually says
The GHG Protocol Land Sector and Removals Standard, finalised in 2024 after a multi-year pilot, sets the rules for how land-based emission reductions and removals enter corporate inventories. The Standard distinguishes between inventory accounting (Scope 1, 2, and 3) and project or intervention accounting (a separate methodology for crediting).
For insetting, the practical implication is that supplier-level interventions, when properly measured and attributed, can reduce your Scope 3 category 1 (purchased goods and services) emissions in your inventory. The reduction is not a credit retired against the inventory; it is a lower inventory number, period.
For offsetting, the credit is retired separately. It can be reported as a contribution toward a net-zero claim under the SBTi Beyond Value Chain Mitigation framework or as part of a VCMI Carbon Integrity claim, but it does not lower the inventory number.
A practical consequence: if your Science Based Target requires a 50% absolute reduction in Scope 3 emissions by 2030, insetting moves you toward the target. Offsetting does not. This single point of difference reshapes the procurement decision.
When insetting counts toward Scope 3 (and when it does not)
Insetting counts toward Scope 3 only when several conditions are met:
- The intervention must occur with an entity in your value chain.
- The emissions reduction or removal must be measured against a defensible baseline.
- The reduction must be attributed to your share of that supplier’s output, not double-counted with other buyers.
- It must follow the inventory accounting rules in the GHG Protocol Land Sector Standard, not the project accounting rules used to generate credits.
The most common failure mode is double counting. If your supplier sells the same reduction as a credit on the voluntary market and also reports it to you as a Scope 3 reduction, the math breaks. The Standard requires you to address this risk, typically by purchasing and retiring the supplier-issued credit as part of your inventory or by contractual provisions that prevent the supplier from selling the reduction twice.
When insetting does not count toward Scope 3: when the intervention sits with a supplier you do not buy from, when the baseline is not defensible, when the attribution is unclear, or when the documentation does not survive audit. Those cases default to Beyond Value Chain Mitigation, which is still useful but operates on a different ledger.
The procurement and supplier engagement question
Insetting is harder than offsetting. That is the unfashionable truth most buyers eventually confront. Offsetting is a transaction; insetting is a relationship.
To run an insetting program, you need supplier mapping precise enough to know which farms or facilities sit at which Scope 3 boundary. You need an engagement model that gets suppliers to participate, which usually requires multi-year commitments and shared economics. You need an MRV architecture that measures the right things and produces audit-ready documentation. And you need a contractual structure that prevents double counting and protects both sides.
The trade-off you receive in return is significant. Reductions count against your inventory rather than your residual. Supplier relationships deepen, which protects sourcing continuity. Yield and quality improvements often follow regenerative interventions, which reduces your input cost over time. And the regulatory file, under CSRD, CSDDD, EUDR, and the SBTi FLAG Guidance, is materially stronger.
Choosing the right tool for the right target
A practical decision rule. If your target is a science-based Scope 3 reduction and you operate in a FLAG sector or source FLAG commodities, insetting is the structurally correct tool. If your target is a net-zero claim that includes neutralising hard-to-abate residual emissions outside your value chain, BVCM via high-integrity offsets is the structurally correct tool. Most companies with material Scope 3 exposure need both, in different proportions, sequenced over time.
The sequencing matters. Insetting takes longer to stand up but produces a permanent reduction in the inventory. Offsetting can be transacted faster but does not change the inventory and now sits under tighter claim restrictions. Treat them as complementary tools with different jobs, not as substitutes. The Accountability Framework Initiative and the IUCN Global Standard for Nature-based Solutions both provide useful guardrails for the insetting side, with biodiversity, human rights, and benefit-sharing requirements that go beyond carbon math.
If you are mapping a Scope 3 reduction roadmap and need to scope which interventions count toward your inventory versus which sit in Beyond Value Chain Mitigation, the carbon and sustainability experts at Carbon Credit Capital can help you structure a nature-based supply chain investment program that fits your FLAG exposure, your target architecture, and your audit horizon. Schedule a consultation.
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