The Economic Side of Increasing RNG Demand

The economic side of increasing RNG demand is driven today by the federal renewable fuel standard – version 2 (RFS2). This creates a system of credits or RINs (Renewable Identification Numbers) tied to amounts of biomass based renewable fuel (ethanol, biodiesel and RNG) that must be blended into petroleum fuels or bought as RINs by obligated parties (today, oil refiners). The USEPA sets annual volume requirements for four categories of renewable biomass-based fuels. RNG generally, but not always, qualifies for the highest value RINs, called cellulosic or D3. These D3 RINs are trading today at high values. Adding the RINs value renders a price of RNG-based CNG significantly lower, not only than gasoline or diesel, but also lower than conventional fossil-based CNG, assuming that traders pass along the RNG value to CNG station operators and customers.

RNG also enjoys a substantial environmental advantage over conventional CNG, which is reflected in its position within the federal RFS. The D3 RINs category was created under the 2007 update to the RFS. At that time policy-makers expected cellulosic (non-corn-derived and lower net carbon) ethanol would comprise an increasing share of the D3 biofuel volume over time. This hasn’t happened. Instead, RNG charged onto the scene and into the market by using tried and true landfill gas recovery and anaerobic digestion technology and leveraging the fleet market penetration by CNG. RNG qualified under the D3 RINs category primarily because biogas production facilities capture and avoid the uncontrolled emissions of methane gas that otherwise accompanies uncontrolled decomposition of organic waste streams. Methane is 30 times as potent by mass as CO2 as a greenhouse gas emission. This translates into approximately 75% net carbon reduction for landfill-derived RNG and 90-115% reduction of net carbon from RNG from anaerobic digesters.

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