Gas utility operators detailed plans to invest in new renewable natural gas production and to seek opportunities to transport the alternative fuel, showing that they remain active players in a corner of the clean energy market that is growing more crowded.

Executives have recently sought to calm Wall Street's concerns that growing interest in the fuel, known as RNG, will drive up project acquisition costs and depress rates of return. Lenders and private equity firms continue to gravitate to the space, while a recent RNG investment by refining giant Marathon Petroleum Corp. demonstrated continued interest among energy industry titans.

During their latest round of quarterly conference calls, gas utilities signaled they will continue to invest in RNG, a fuel processed into pipeline-quality gas from decomposing organic matter at farms, landfills and other sites.

"We have a number of additional RNG projects in the pipeline, and we're excited for what lies ahead," Chesapeake Utilities Corp. President and CEO Jeff Householder told analysts on a Feb. 23 conference call.

Building out RNG production capacity

During the call, Chesapeake Utilities outlined the foundation for a sustainable energy platform in Florida, including a recently completed injection point capable of flowing alternative fuels into its Florida Public Utilities Co. gas distribution system. The company also announced it would build an RNG production facility at a dairy farm in Florida.

Chesapeake Utilities previously focused on processing RNG from poultry waste, a niche application, in its Delaware and Maryland gas utility service territories. The company is considering converting a recently acquired Maryland biogas facility to produce RNG, Chesapeake Utilities CFO Beth Cooper said.

Federal and California low-carbon fuel standards — and now investment tax credits in the Inflation Reduction Act — continue to underpin RNG investments, Jerry Norcia, president and CEO of Detroit-based multi-utility DTE Energy Co., said during a Feb. 23 conference call. While the Inflation Reduction Act's RNG incentives have attracted additional competition, DTE subsidiary DTE Vantage controls landfill gas projects that it can convert for RNG production, executives said.

That gives DTE Vantage line of sight into project development for at least two to three years, Norcia said. In 2023, DTE Vantage anticipates placing three new RNG projects into service, according to Norcia.

Renewable gas investments at UGI Corp. have reached $450 million, and analysts should expect further momentum, UGI President and CEO Roger Perreault said Feb. 2. Shortly after, the company announced its nonregulated energy services business will partner with BP PLC subsidiary Archaea Energy Inc. to develop a landfill RNG project in Pennsylvania, the heart of UGI's gas utility segment.

Dominion Energy Inc. Chairman, President and CEO Robert Blue said the company had 21 RNG projects in operation or under construction as of its Feb. 8 conference call, up from 15 at the end of November 2022.

Getting RNG flowing

WEC Energy Group Inc. expects RNG to begin flowing on its system in 2023 as it continues to sign a series of off-take agreements, President and CEO Scott Lauber said on a Feb. 2 conference call. The company's latest contract in January brought the total amount of RNG poised for pipeline transport to 1 Bcf per year, Lauber said.

One Gas Inc. subsidiary Oklahoma Natural Gas Co. filed a request in December 2022 to operate a voluntary RNG tariff, which would allow residential, small commercial and industrial customers to purchase the fuel voluntarily. If approved, the gas utility would pilot the program through 2027, One Gas COO Curtis Dinan said on a Feb. 23 call.

NiSource Inc. has pursued voluntary RNG tariffs in several states with mixed results. In December 2022, state regulators approved a program to offer Columbia Gas of Virginia Inc. customers a mix of carbon offsets and RNG certificates, while utility commissioners in January rejected a similar proposal by Columbia Gas of Maryland Inc.

During a Feb. 22 call, NiSource executives included RNG investments in a basket of upside opportunities that would likely materialize beyond the company's current five-year capital spending plan.

RNG initiatives advance amid building electrification push

Pacific Northwest gas distributor Avista Corp. recently issued its first request for proposals seeking RNG resources on behalf of its customers, President and CEO Dennis Vermillion told analysts Feb. 22.

The company is one of several gas utility operators facing more restrictive policies for gas use in the region, including statewide electric heating mandates in Washington and localized gas bans in Oregon.

Northwest Natural Holding Co. President and CEO David Anderson made a case against those gas bans during a Feb. 24 call while also promoting the company's RNG endeavors. In 2022, Northwest Natural Gas Co. began producing RNG on behalf of regulated utility customers through its first project investment. Nonregulated subsidiary NW Natural Renewables Holdings LLC also started construction on its first RNG facility.

Shortly after reporting earnings, New Jersey multi-utility Public Service Electric and Gas Co. proposed spending $123 million to build a landfill RNG facility capable of injecting 1 Bcf per year of the fuel into the company's gas distribution system.

The Public Service Enterprise Group Inc. subsidiary proposed the plan two weeks after New Jersey Gov. Phil Murphy set a goal of electrifying 10% of the state's building stock and directed state utility regulators to initiate a proceeding on the future of gas utilities in the state.

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