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The two largest landfill operators in North America have
committed nearly $2 billion recently for new renewable natural gas
(RNG) installations, indications that the fossil fuel substitute is
overtaking production of electricity as the preferred end-use of
the captured methane.
Waste Management on 28 April said it will invest $825 million to
build RNG plants at 17 landfills it owns, more than doubling its
RNG production sites. A week later, Republic Services, the
second-largest landfill operator, and biofuels firm Archaea Energy
on 5 May announced a $1.1-billion joint venture to develop 39 RNG
projects across the US.
Biogas is made from methane generated from a wide variety of
organic matter, most commonly sourced from landfills, manure, or
sludge from wastewater treatment plants. RNG is a purified form of
biogas, indistinguishable from fossil fuel natural gas. It is a
higher-value product though that can be used to fuel vehicles just
like compressed natural gas and drive industrial heating processes
just like natural gas. According to the World Resources Institute,
nearly 40% of the natural gas
consumed by vehicles in the US in 2020 was RNG, and the figure is
rising.
Approximately 2,300 biogas projects were operating across the US
as of the start of 2022, according to the American Biogas Council. Of those, about 2,000
generate electricity on site and send it to the power grid.
The other 300 units are upgrading the biogas to RNG—and
that's where the growth is occurring, Patrick Serfass, the
council's executive director, told Net-Zero Business Daily
by S&P Global Commodity Insights. "About nine of 10 new
projects in development today are for RNG," he said.
New investments
The Archaea-Republic and Waste Management investments will meet
rising demand for RNG as a zero-carbon or even negative-carbon
energy solution. (However, the end use of RNG does generate
emissions, just like burning fossil fuel natural gas.)
Archaea Energy will install RNG conversion capacity at landfills
operated by Republic Services in 19 states. Republic Services is
the buyer of the gas, and it will contribute approximately $300
million toward the projects, with Archaea Energy contributing
approximately $800 million, they said in a press release.
The projects, all of which are expected to be operating in the
next five years, will have production capacity of about 12.5
million MMBtu of RNG per year, or about 34,000 MMBtu/day.
"Sustainability is a platform for growth at Republic, and our
continued investment in landfill gas-to-energy projects delivers
meaningful environmental and economic benefits to our
stakeholders," said Jon Vander Ark, Republic Services president and
CEO, in a statement.
The company has set a goal of doubling its capture of biogas by
2030, he said. This is an economic opportunity, as well as an
environmental goal, he added. "Market demand for renewable natural
gas to reduce greenhouse gas emissions is growing significantly,"
he said.
For Archaea, it's the second large deal this year. In February,
it announced a 20-year agreement with FortisBC, a Canadian energy
producer. FortisBC has committed to the purchase of approximately
7.6 million MMBtu/year of RNG generated by Archaea from its
existing and planned RNG production facilities. The purchases will
help FortisBC move towards its goal of 15% RNG use by 2030, it
said.
Waste Management said that its investment will more than double
its landfill gas operations in North America from 16 units today to
33 by the end of 2026. New units in Oklahoma City, Oklahoma, and
Springdale, Arkansas, are on track to reach service this year.
In an email to Net-Zero Business Daily, the company
said expects production by the end of 2026 to reach about 24
million Btu/year, and it said it will be capturing approximately
1.3 million metric tons/year of CO2-equivalent that would have been
released to the atmosphere through decomposition of organic
matter.
Conversion of biogas to RNG "is a smart economic move for the
companies and their shareholders," said David Cox, founder and
chief financial officer of the Coalition for Renewable Natural Gas.
"These companies have realized they're not only in the refuse
business any more; they're in the energy business," Cox told
Net-Zero Business Daily.
Growth driven by incentives, ESG
In its semi-annual North America Natural Gas Long-Term
Outlook, released in February, S&P Global Commodity
Insights said that RNG production in North America was about
170,000 MMBtu/day in 2020, but will more than double to about
450,000 MMBtu/day in 2022. Output is projected to rise to about
550,000 MMBtu/d in 2023 and grow steadily to nearly 1 million
MMBtu/d in 2026.
However, those volumes should be kept in perspective, as they
are less than 1% of projected total US natural gas production in
2026 of 106.3 million MMBtu/d.
Growth is being driven by two factors, say analysts. First are
incentives in the federal Renewable Fuel Standard (RFS) program and
the California Low Carbon Fuel Standard (LCFS), both of which
provide tradeable credits for RNG that's used in
transportation.
California's LCFS makes RNG particularly attractive, and the
California Public Utilities Commission (CPUC) said RNG accounted
for about 12% of the state's natural gas use in 2020, or about 14
Bcf. In February, California raised its commitment to RNG again, as
the CPUC approved a minimum mandated use by the state's utilities
of 17.6 Bcf/year of RNG in 2023. This will rise to 73 Bcf/year by
2030.
Uncontrolled emissions of methane in the waste, landfill,
agriculture, and forest management sectors account for more than
75% of the state's methane emissions, the CPUC said. The RNG
program will reduce that by nearly half by 2030.
The second factor driving RNG demand is the environmental,
social, and governance commitments (ESG) of large companies across
North America. "Investors are demanding lower carbon operations,
and RNG is a great pathway," said Serfass.
Waste Management is checking a box in its ESG plan, as it
intends to operate at least half of its fleet of vehicles on RNG by
2030, and it said the new production facilities will accelerate
reaching that goal.
To cite one of many examples in the industrial sector, Serfass
said that global cosmetics company L'Oreal has a sustainability
plan. It can't make cosmetics cost-effectively and efficiently with
electric power, so it needs natural gas. It's buying RNG to drive
its processing facilities.
When operating in the "voluntary market" driven by ESG
considerations, gas buyers such as L'Oreal sign long-term contracts
for RNG, Serfass said. This provides developers such as Archaea
with a guaranteed income stream that eases financing for the
projects.
In the "compliance market" of the RFS and LCFS, the value of a
credit generated by RNG goes up and down based on market
factors.
"If you are an investor in this space, you have both options,
depending on your risk appetite," Serfass said.
In carbon credit markets, RNG is a particularly valuable
commodity because it achieves carbon reductions through the fuel
lifecycle—with some sources deemed to be
"carbon-negative"—and thus generates higher value credits than
other alternative fuels, Cox explained.
Argonne National Labs, which is operated by the US Department of
Energy, has developed the GREET (Greenhouse Gases, Regulated
Emissions, and Energy Use in Technologies) model to calculate the
lifecycle emissions of the production and use of every type of fuel
and energy resource. GREET is used by the US Environmental
Protection Agency and states to measure the tons of CO2 emissions
that would be generated, and thus the emission credits for avoiding
them. Turning landfill methane into RNG generates signficant carbon
emissions benefits because methane that would otherwise escape to
the atmosphere has been captured, Cox explained.
Under the California LCFS, the carbon
intensity (CI) score for landfill-based RNG is often half of the
diesel fuel baseline, Cox said. As each RNG facility is
individually assessed by state agencies, some CIs derived from
animal manure have received scores at negative 300 or more, Cox
said.
Source: World Resources Institute, based on California Air
Resources Board data
Cox said that the best markets for RNG are hard-to-electrify
applications, such as buses or heavy-duty trucks. "Maybe, some day
we will get to the point of viable electric 18-wheelers, but that's
not where we are today," he said.
Serfass added that utilities and manufacturers seeking to reduce
their carbon footprint find RNG attractive because the
negative-carbon formula means that they can achieve their goals at
relatively low purchase volumes. "If you're a natural gas user, you
don't have to replace all of your gas to be carbon neutral to reach
net-zero," he said.
Future looks bright
Looking ahead, the trade group leaders said they expect
significant growth in North America. The American Biogas Council
estimates that 15,000 waste sites and farm
operations are strong applicants for biogas facilities,
including RNG. Europe has already built out its sector more
extensively than the US, with about 10,000 facilities
operating.
"That's why you see European and Asian companies looking to get
a foothold here—they see the potential," Serfass said.
Given the goal of the US and other nations to reduce methane
emissions, RNG is an obvious solution, Cox added. "We as a society
are producing waste. That waste will decompose, and it will release
methane. We have a decision to make: What are we doing to do with
that waste we are producing?" he said. "What these [landfill and
biogas] companies are doing is taking an environmentally
responsible stance in collecting that methane and then putting it
to productive use to displace a higher-carbon alternative."
The fact that this process can be done at a profit makes it even
more attractive, Serfass added. "It's great that money is being
made to produce renewable energy because nobody is paying to
recycle the organic material," he said.