Federal Government, States, Industry Study Renewable Natural Gas as Cleaner Resource

Published: November 12, 2021

By: Concentric Staff Writer 

The federal government, some states, and the energy industry are increasingly looking to renewable natural gas (“RNG”) as an alternative to regular fossil-fuel-based natural gas in the power-generation and transportation sectors. However, there are challenges to overcome, such as availability of the resource, its cost, and environmental opposition.

Renewable natural gas is fully interchangeable with conventional natural gas and is capable of being transported through natural gas pipelines and used in natural gas-powered vehicles, according to the U.S. Energy Information Administration (“EIA”). RNG is a biogas, or the gaseous result of the decomposition of organic matter that is processed to industry purity standards.

Similar to conventional natural gas, RNG can be used as a transportation fuel in the form of compressed natural gas or liquefied natural gas that can replace diesel fuel. RNG qualifies as an advanced biofuel under the Renewable Fuel Standard, a federal program created in the mid-2000s which requires renewable fuel to be blended into transportation fuels at increasing levels annually, culminating in 36 billion gallons by 2022, according to the EIA.

State governments are also beginning to notice the potential of RNG. In 2019 Oregon passed SB 98, a first-of-its-kind RNG program to be implemented by the Oregon Public Utilities Commission. The bill, which is meant to stimulate the RNG industry by increasing demand, requires the PUC to set voluntary RNG procurement targets for utilities, ultimately stepping up to a 30 percent RNG target by 2050.

Utility Southern California Gas Co. is researching expanded usage of RNG, and the City of Los Angeles included RNG-fired turbines in its LA100 zero-emission plan. California is also showing movement in growing RNG as a resource through a pilot program by the California Public Utilities Commission (“CPUC”).

In December 2020 the CPUC approved an RNG tariff pilot program for residential, small commercial, and industrial customers of investor-owned utilities. The three-year pilot program will help the CPUC understand whether such efforts encourage polluting activity or take advantage of a waste, the CPUC said. The program is designed to reduce greenhouse gas emissions and help customers become comfortable using RNG as part of their regular natural gas service. This will guide the state in deciding whether it should set statewide biomethane standards, according to the CPUC. The program includes an RNG commodity charge of $1.51 per therm, which is about four times higher than the non-RNG commodity charge of 36 cents per therm under a participant’s regular gas tariff.

The CPUC is requiring that at least 50 percent of the RNG supply procured through the program come from in-state or out-of-state pipelines. RNG sources outside the U.S. that have not already been delivering RNG through a common-carrier pipeline would not be allowed to participate. This is to promote a regulatory goal of increasing production of in-state and national RNG, the CPUC said.

A study by the University of California Davis, noted that the growth of natural gas fueling infrastructure improves the prospects for the development of a commercially viable RNG industry in California. The study, “The Feasibility of Renewable Natural Gas as a Large-Scale, Low Carbon Substitute,” was done for the California Air Resources Board.

“The development of alternative fuels that have low greenhouse gas and criteria pollutant emissions, such as renewable natural gas, are vital for the state of California to meet climate change and air quality goals,” the study says. At current credit prices, including California’s Low Carbon Fuel Standard and the U.S. Renewable Fuels Standard, up to 82 billion cubic-feet per year of RNG supply could be attractive for private investment at competitive rates of return in developing RNG sources from landfill, dairy, municipal solid waste and waste-water sites combined, the study says.

Biogas is produced from various sources through a biochemical process such as anaerobic digestion or thermochemical means such as gasification. Anaerobic digestion refers to processes in which microorganisms break down biodegradable material, EIA said. Sources for biogas include landfills, which are the third-largest source of human-related methane emissions in the U.S. Biogas can also be recovered from livestock operations through biogas recovery systems such as anaerobic digesters, as well as from wastewater treatment and other industrial, institutional, and commercial sources like food manufacturing, supermarkets, restaurants, hospitals, and educational facilities.

In an analysis released Oct. 26, Southern California Gas Co. (“SoCal Gas”) called for a Clean Fuels Procurement Standard to accelerate deployment of clean fuels. The benefits that could be harnessed from increased deployment of RNG include capturing the emissions of unused waste methane from landfills and agriculture, reducing the need for fossil-based gas, and cutting production and waste disposal costs.

“RNG can be an important renewable energy tool because it is available anytime consumers need it,” SoCal Gas said in a briefing on its website, pointing out that renewable energy resources like wind and solar are intermittent. But waste material can be converted into RNG 24/7 and can be deployed through the existing pipeline network.

The City of Los Angeles, aided by research from the National Renewable Energy Laboratory, has realized that its goal of transitioning the city to 100-percent zero-emissions will not be possible with “renewably fueled combustion turbines” in the LA Basin, to support electric grid reliability and back-up intermittent renewable generation.

But the Natural Resources Defense Council points out limitations to RNG, such as its availability, cost, and impacts on the environment and human health. In a June 2020 study, NRDC estimated that RNG only has the potential to replace 3-7 percent of current fossil-based gas. It also points out that methane leaks from pipelines are possible. NRDC cited a California Energy Commission study that estimated that biogas will cost $8-$40 per MMBtu by 2050 and that synthetic methane will cost between $37-$90 per MMBtu by that time.

The United States uses more than 31,000 trillion BTUs of fossil gas annually, according to EIA. Fossil gas, or natural gas, consists primarily of methane. In the United States, about 36.5 percent of natural gas is used for power generation, 27.5 percent for heating and cooking in residential and commercial buildings, 27 percent for industrial processes, and 8.9 percent for producing, transporting, and processing natural gas. Less than 1 percent is used for fueling vehicles.

The California Energy Commission’s (“CEC”) 2020 Integrated Energy Policy Report states that renewable gas “may also have a place in reducing pollution, such as smogforming nitrogen oxides.” There has been a rapid expansion of RNG facilities in the state, which currently has the energy potential equal to about 25 percent of the state’s diesel fuel supply.

But the CEC noted that RNG is mostly composed of methane, a potent greenhouse gas with 25 times the warming potential of carbon dioxide, leading them to state “the state must balance the benefits of renewable gas against the impacts of methane leakage.”

As RNG is studied and implemented more, it should become clearer how feasible it will be to replace portions of the natural gas supply with this cleaner resource, and what the trade-offs will be in terms of cost and environmental impact.

All views expressed by the contributors are solely the contributors’ current views and do not reflect the views of Concentric Energy Advisors, Inc., its affiliates, subsidiaries, or related companies. The contributors’ views are based upon information the contributors consider reliable at the time of publication. However, neither Concentric Energy Advisors, Inc., nor its affiliates, subsidiaries, and related companies warrant the information’s completeness or accuracy, and it should not be relied upon as such.

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