The Renewable Gas Supply Issue

February 2, 2018

For several years there have been significant efforts to capture and divert fugitive renewable gases toward the transportation sector where, as a replacement for diesel in heavy duty vehicles, the fuel can do tremendous good. This is particularly true in California where many progressive policies have been passed to divert organic waste from traditional, unsustainable disposal methods and reduce emissions of climate-altering short lived climate pollutants.

However, some opponents of using renewable natural gas (RNG) as a transportation fuel question whether there is enough supply of renewable gas. The doubts that they raise about supply lead them to conclude that RNG is not an energy source that should be taken seriously.

Supply vs. Demand

Some claim that policy makers should not invest resources in developing the markets for renewable gas, particularly in the transportation sector, in part because the supply of renewable gas in the state will never match the demand, and will only be capable of replacing a small fraction of the fuel consumption that is currently fed by fossil gas. They point to recent studies that suggest the potential quantity of economically recoverable gas in California is no more than ten percent of the fuel demand in the transportation sector.

The primary reason to capture and beneficially reuse gases from organic material is to develop and make permanent the sustainable management of the massive volumes of waste humanity produces.

For the moment, let’s set aside the case that can be made that the potential supply of RNG in California is far greater than these studies suggest, and focus on the idea that purveyors of this point of view would have us believe that since the in-state potential to produce renewable gas does not come close to matching demand, efforts to promote renewable gas use should give way to other strategies. The internal logic of this argument assumes that California is an isolated energy economy that produces all of the fuel that it consumes. However, nothing could be further from the truth.

California is not now, nor has it ever been a segregated energy market. California has always relied on the supply of electricity, natural gas and petroleum from outside its borders.

Interestingly, RNG opponents often also argue that California’s electricity market needs to be linked to those of other states to bring greater balance, reliability and resiliency to the state’s growing reliance on renewable electricity. The contradiction is obvious – if California’s renewable electricity system must be linked to outside markets to ensure supply and dependability, shouldn’t there be a similar view on trading renewable gas beyond the state’s borders?

To ensure our survival, and reduce and mitigate our environmental footprint on the earth, we must incorporate the practices of waste reduction, reuse, and recycling in all waste management practices.

Furthermore, of the 143.8 million diesel gallon equivalents of natural gas sold as a transportation fuel in California in 2016, 88.5 million—or 61.5%— was from renewable sources. Nearly all of that RNG came from producers outside the state. Thus, unless we suspend the importation of RNG, out-of-state renewable gas will continue to be a major supply source for the state’s growing inventory of natural gas trucks and buses.

Money-Making Opportunities

The fact of the matter is that renewable gas production is developing at a much more rapid clip outside of California than it is here, but it is being driven, in part, by California’s climate protection policies. While it is true that renewable methane is more expensive to produce than the fossil variety, the revenue that can be generated through the sale of its low carbon and renewable attributes is astounding. Wouldn’t it be nice for in-state RNG producers to be making money on the sale of RNG to California fleets instead of producers in other states?

California is only now beginning to invest into in-state RNG production capacity. There are a variety of new dairy, food processing and food/green waste renewable gas production projects in the works. These projects will generate $20 to $75 per million BTU (MMBTU) of revenue from the sale of their biogas to transportation consumers in California. Low carbon gas to transportation consumers. For reference, the commodity price of fossil gas has been hovering between $3 and $4/MMBTU for years. It is that kind of money-making opportunity that is attracting entrepreneurs to invest in projects to capture and beneficially reuse fugitive methane. Not only does this emerging trend bring investment to California’s program to reduce short lived climate pollutant, but also further undercuts the claim that there is a supply constraint.

California is not now, nor has it ever been a segregated energy market. California has always relied on the supply of electricity, natural gas and petroleum from outside its borders.

Supply Concerns Miss the Point

Concerns about supply are misplaced and the apprehensions massively miss the point. The primary reason to capture and beneficially reuse gases from organic material is to develop and make permanent the sustainable management of the massive volumes of waste humanity produces.

To ensure our survival, and reduce and mitigate our environmental footprint on the earth, we must incorporate the practices of waste reduction, reuse, and recycling in all waste management practices. Given the overwhelming and immediate public health and climate protection benefits of using renewable gas as a substitute for diesel in heavy-duty vehicles—and the fact that this can be done cost-effectively using existing market forces—the transformation of waste-to-renewable energy must begin with the transportation sector.

As reality informs us, supply will take care of itself.