“Today, renewable natural gas (RNG) is running the market (for natural gas transportation fuel),” said Paul Niznik from Argus Media in his remarks to the 200+ attendees of the Coalition for Renewable Natural Gas conference in San Diego last week. “You are driving the growth, and with that leadership comes responsibility.”
While this might be a somewhat California-centric view, it is based on a combination of economics and the impact of corporate sustainability imperatives – two related factors ready to impact markets for CNG and LNG fuels across the country today.
(See the sidebar article about RNG economics and environmental factors.)
According to David Cox from the RNG Coalition, about 80% of RNG production still comes from landfills, but biogas streams from USEPA-regulated landfills are now about 75% captured. Anaerobic digestion provides 20% of the biogas, but represents a huge area of growth nationally with a high ceiling. Quasar energy and Renergy, both Clean Fuels Ohio members, are examples of Ohio-based producers. In Ohio alone, according to an estimate by Energy Vision, we have enough biogas feedstock to displace 40% of the total statewide diesel fuel consumption, including all off-road and on-road sources. The best pathway to large-scale RNG use requires that RNG producers process gas so it meets a gas pipeline quality specification, then secure a pipeline interconnection. Once the gas is in the system, fleet users may purchase its “environmental attributes” through a trader, who in turn compensates the producer. The actual gas molecules and are consumed locally.
For several years, Clean Fuels Ohio has recognized the value and opportunity presented by RNG as a truly home-grown, sustainable and economically viable alternative. In 2010 we partnered with the U.S. Department of Energy to host Waste to Wheels, a conference that drew a national audience and featured technical information about RNG and tours of four separate landfill and digester facilities. In December 2015, we presented Waste to Wheels 2. Yet, advancing the market for RNG in Ohio has been frustrating – not because of anything on the fleet side. Ohio fleets clearly want RNG. The problems have been on the supply side.
One, for various reasons, in Ohio and many other places, RNG producers have found it difficult and expensive so far to gain a pipeline interconnection.
Two, gas entering the system, including Ohio-produced gas, is being sold to fleets in California where traders can take advantage of additional incentives through the Low Carbon Fuel Standard (LCFS). The LCFS added value is fairly marginal but it’s enough to draw the RNG attributes out of Ohio and other states to California. So strong is this “gravitational pull,” as some traders called it, that over half of the CNG consumed in California transportation today is RNG.
We’ve spoken with many Ohio fleets that want RNG. So I wanted to attend the RNG Coalition conference in order to determine how we can overcome these two primary market barriers and make connections necessary to begin to supply them, hopefully in 2017. The good news is I believe prospects for success are good.
On the utility interconnection side, gas utilities in California and elsewhere are developing model processes for RNG pipeline interconnection that will feature consistency is specifications, transparency and clarity for producers. I spoke with one utility representative who told me that while they still need to do the design work, they will allow RNG producers to do the site engineering and construction based on the utility-dictated design, and subject to utility oversight. Hopefully, Ohio utilities – with encouragement from policy-makers and regulators – can begin to adopt these models to help contain producer interconnection costs.
On the gas supply side, I spoke with several traders who expressed an interest to work with Ohio fleets to help acquire RNG environmental attributes. We are prepared to follow up on these contacts on behalf of interested Ohio fleets. At the macro-level, traders, marketers and even some producers suggested that the California market is getting close to RNG saturation. As this happens, supply will become available outside of that state. They also recognize the need to build a true national market for RNG – part of the leadership role that Paul Niznik encouraged the industry to play. We should be able to leverage the great work done by Ohio industry leaders and fleets over the last five years to build a strong CNG market foundation in Ohio (a foundation we hope to expand with Ohio’s new alt fuels incentive program). To the degree that our market wants RNG, an increasing number of traders seem ready to listen.
Finally, the near-term viability of RNG depends on continuation of the RFS and expansion of volumes. Uncertainties with the new Administration and Congress lie ahead. Federal policy uncertainty is a risk factor, but Mike McAdams, Advanced Biofuels Association and veteran lobbyist on the national scene believes that advanced and cellulosic biofuels such as RNG will be seen in a different context than conventional biofuels such as ethanol. All biofuels still enjoy strong support in Heartland states that matter greatly on the national political scene. (The prospects for the RFS and renewable fuels are the subject of a separate article.)
Since the conference last week, I’ve followed up with the contacts I made. I’ve also placed a few calls to Ohio fleets I know have an interest in RNG. I’m excited to take next steps. After years of playing a leadership role in RNG but seeing fleets in other states reap the rewards, I’m hopeful that 2017 will finally be the year for fleet RNG here in Ohio.