From waste to fuel: the prospects for renewable natural gas in the US

While hydrogen initiatives have been grabbing headlines thanks to large-scale national plans and projects at corporate level, renewable natural gas (RNG) also deserves attention as an emerging tool for decarbonization.

RNG comes from capturing biogas from areas like landfills and farms and then cleaning and upgrading that gas to remove excess carbon dioxide to then turn it into biomethane, which is more commonly referred to as RNG. This process is needed to bring the methane portion of biogas to a level that can then be blended with conventional natural gas on existing pipeline infrastructure, to avoid diminishing the quality or heat content of the pipeline.

As in the case of hydrogen, policies will be critical for RNG to be a competitive alternative to fossil fuels. A recent special report from S&P Global Platts Analytics, The role of renewable natural gas in a carbon-constrained US market, highlighted some of the key considerations in assessing the potential of RNG in the US today:

1. RNG could play a key role in curbing methane emissions

Capturing biogas for RNG offers net-zero carbon potential since it reduces emissions that would otherwise escape directly into the atmosphere. At the same time, it can displace higher-emitting fossil fuels (diesel, natural gas) which include emissions from leaks and venting at or near the wellhead. In addition to these climate benefits, RNG also lowers nitrous oxide (NOx) emissions that have harmful health impacts.

2. Transport is a main use today, as the number of CNG vehicles grows

The latest available data shows new yearly additions have slowed though, falling to 4,550 new vehicles in 2017 and below 1,300 in 2019, based on Platts Analytics estimates that factors in NGV demand for the last two years. This is sharp drop from more than 8,700 in 2015. However, given more states have enacted polices since 2015, as well as proposing new legislation to support increased use of RNG, its likely annual CNG vehicle growth has not peaked. Furthermore, the increased state interest in RNG means any new CNG vehicles going forward, particularly large vehicles, will likely elect to use RNG.

3. RNG is appealing to US energy companies looking to diversify

The latest example of this was seen in California. Southern California Gas Company (SoCal) announced an agreement between SoCal, the San Diego Gas & Electric Company, consumer advocate groups, various industry groups, such as RNG Coalition, and the Environmental Defense Fund (EDF), to bring increased volumes of renewable natural gas (RNG) to California customers. The program will be made available to both residential and non-residential customers, with the latter having a purchase percentage option to choose how much of their natural gas is RNG, ranging from 25% to 100%. The tariff favors in-state supply that extends beyond landfills, subject to cost limits. RNG use will also reduce emissions under California’s GHG cap and trade program.

Go deeper: Request a copy of the S&P Global Platts Analytics report on RNG in the US market

4. Landfill has the greatest supply potential and cost appeal…

Estimated technical potential from all US landfills exceeds 2,900 million diesel gallon equivalent, or 1.0 Bcf/d of gas equivalent, according to the EPA - assuming all landfills not currently being used to produce RNG are eventually brought online to capture and upgrade biogas into RNG. This makes up two thirds of total estimated US RNG potential. Based on the EPA’s existing landfill methane outreach program (LMOP) 578 landfill projects are in operation as of December 2019, most for biogas production, but increasingly used to produce RNG. EPA estimates another 478 candidate projects could be used for biogas or RNG. Most landfill projects are found to be economical at $10/MMBtu or less.

5. …but dairy and swine farms offer the lowest carbon intensities (CI)

Despite project costs being estimated at $30/MMBtu or higher, farm-based RNG production, such as from dairy or swine manure, is growing, with strongly negative CIs indicating a net negative impact on GHG emissions and strong incentives from California’s Low Carbon Fuel Standard (LCFS) program. The weighted-average CI for bio-CNG/LNG for 4Q19 was 22 g/MJ, but dairy or swine projects can have CIs of -350 g/MJ or lower.

6. California is the front runner in US RNG policy initiatives

The existing LCFS program has already helped California’s transportation sector RNG volumes reach upwards of 37 MMDGE, or 13 MMcf/d, as of 3Q 2019, which makes up approximately 17% of total US RNG volumes.

In addition to this, the California Public Utility Commission is pursuing multiple rulemaking phases to increase renewable gas serving the state’s energy needs and reduce methane emissions. Legislation from 2018 (SB 1440) calls for renewable gas procurement targets for utilities. The bill primarily focuses on biomethane, but renewable hydrogen blending is an option, under the umbrella of “renewable gas”, to displace fossil natural gas. It is estimated California has upwards of ~250 MMcf/d in RNG that is deemed as technically producible, but again, costs will make it a challenging task to fully achieve this potential.