Demand for Renewable Natural Gas and Innovations in Biogas Upgrading

 In order to reduce global energy consumption and greenhouse gas emissions, sectors like agriculture (11% of all global emissions), industry (24% of global emissions), and transportation (27% of global emissions) will need to leverage innovative solutions to reduce their environmental footprint and carbon emissions. Technologies that recover energy from a variety of sources including organic waste will be needed to support companies and governments looking to achieve net zero and implement circular solutions, especially as certain volumes of waste streams continue to grow.

As a result, due to the global demand for renewable energy and carbon neutral solutions, there has been an increased demand for biomethane, also known as renewable natural gas (RNG). The demand for biomethane has been bolstered by multiple policies divesting from foreign natural gas, providing tax credits for new anaerobic digestion facilities, extending alternative fuel standards, and diverting food waste from landfills.

Anaerobic Digestion Can Generate Renewable Natural Gas

Anaerobic Digestion (AD) plays a crucial role in biomethane production. AD processes take organic matter such as manure, sewage, agricultural waste, and food waste, and breaks these substances down to produce biogas which is composed of methane (~60%) and carbon dioxide (~40%). Biogas can then be used to generate heat and electricity directly or be upgraded to produce biomethane, bio-CNG (compressed natural gas) or hydrogen through methane pyrolysis.

Multiple companies and operators of AD processes are expected to expand and have received investments to develop projects across the U.S. and EU to meet biomethane demands. RNG is also in demand because it can be used as a drop-in replacement for natural gas and be injected into natural gas infrastructure. This allows hard to electrify sectors that are currently using natural gas or natural gas byproducts to implement more sustainable solutions to address their emissions.

Renewable Natural Gas as a Solution to Diversify Energy Supply for Utilities and for Hard to Electrify Sectors

Biogas and RNG production can come from a variety of sources that include livestock waste, food waste, wastewater sludge, and landfill gases that release methane. The U.S. Energy Information Administration estimates that in 2020:

  • Roughly 256 billion cubic feet (7.24 billion cubic meters) or 10 billion kilowatt hours of energy was produced from captured landfill gas over 327 landfill sites.
  • 1 billion kWH of electricity was produced from sewage treatment plants and 0.17 billion kWh of electricity was produced from biogas from anaerobic digestion treatment facilities.

Although biogas to electricity can be one pathway, energy providers are increasingly looking to generate electricity from their portfolio of solar and wind solutions which can provide cheaper and more environmental solutions. However, managing and storing the energy from these solutions is not as easy as storing biogas that has been upgraded to renewable natural gas. As a result, electricity and energy providers can also benefit from integrating renewable natural gas into their systems and leveraging the existing infrastructure built for natural gas as needed.

For example, PG&E is looking to upgrade and inject renewable natural gas into their existing pipeline infrastructure in California and see anerobic digestion and biogas upgrading as a crucial step in their decarbonization strategy. Additionally, hard to electrify sectors like heavy duty trucking can look to utilize RNG to improve their environmental footprint, as Walmart and Chevron have done to pilot RNG fueled trucks at Walmart’s distribution center in Fontana, California.

Although in the U.S., RNG production may be more costly than natural gas, in Europe estimates suggest that biomethane production is up to 30% cheaper than natural gas, further driving demand for the resource in European markets.

Policy Drivers for Renewable Natural Gas Production

In addition to corporate demand for RNG, there are multiple policy drivers accelerating the development of anaerobic digestion facilities and biogas upgrading technologies to meet the growing RNG demand also bolstered by municipal and government commitments. Many countries like the U.S. and those in the EU are looking to reduce their reliance on foreign gas imports following Russia’s invasion of Ukraine.

For the European Union, the RePowerEU Plan, aims to increase the production of biomethane (or renewable natural gas) to 35 billion cubic meters (bcm) from the current rate of 3 bcm that is now being produced in the EU. Similarly, the U.S. has made commitments to reduce natural gas imports and the Inflation Reduction Act will further incentivize biomethane production and the development of anaerobic digestion facilities through the distribution of tax credits and grants.

This is in addition to incentives for renewable gas production coming from the Renewable Fuel Standard which provides RIN credits and the California Air Resources Board Low Carbon Fuel Standard. It’s estimated that with the combined credits, there could be a saving of up to $33/MMBTU (Million British Thermal Units).

Innovation Landscape

In order to meet the growing demands for RNG and biogas production, anaerobic digestion plant operators will need to incorporate innovative technologies that can increase the biogas yield from anaerobic digestion processes and can upgrade biogas into renewable natural gas. Examples of innovators that have recently raised funding and are well positioned for growth given the accelerating demands for RNG include:

The demand for renewable natural gas and biogas yield will not only accelerate the growth of innovative technologies producing RNG but it will also drive growth of the entire anerobic digestion sector, as investors look to develop more facilities in projects in the U.S. and Europe.

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