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Study finds renewable natural gas could meet ~85% of current natural gas use in transport in California by 2020s; much higher volumes possible with right policies
5 December 2016
A study by a team from UC Davis for the California Air Resources Board (ARB) has found that the state could produce 14 bcf (billion cubic feet) per year of renewable natural gas (RNG) (biomethane) by the 2020s, meeting roughly 85% of current natural gas use in transport California at LCFS (Low Carbon Fuel Standard) credits of $120 per metric ton of CO2.
In addition, RNG use could be much higher if the LCFS credits were combined with US federal RIN credits (Renewable Identification Number, part of the Renewable Fuels Standard, RFS), the study found. Given the appropriate policy and market measures, the state’s RNG production potential is 90.6 bcf/yr (≈ 750 million gasoline gallons). The main barriers to large-scale RNG use are the state’s high cost of pipeline interconnect and the cost of upgrading to pipeline standards.
RNG is produced from organic materials or waste streams; the lifecycle emissions for RNG have the potential to be lower than the emissions of fossil natural gas. There are multiple potential technology pathways for capturing RNG, each with different economics, including landfill gas to energy (KGTE); anaerobic digestion (AD), wet (dairy waste) and dry (food waste); and gasification, standard and plasma.
The possible development of California’s renewable natural gas resources comes at a time when the traditional fossil fuels natural gas industry is expanding its supply and infrastructure into the transportation sector. Liquefied natural gas (LNG) fueling stations for heavy trucks now exist in over a dozen locations around the state of California and continue to expand. California represents about 71% of US LNG truck refueling facilities and about 200,000 gallons/day of LNG were trucked into California in the mid-2000s.
California has the potential to produce approximately 90.6 billion cubic feet (bcf) per year (750 million gasoline gallon equivalents (gge) per year) of renewable natural gas from dairy, landfill, municipal solid waste, and wastewater treatment plant sources.—“Final Draft Report on The Feasibility of Renewable Natural Gas as a Large-Scale, Low Carbon Substitute”
The team from the STEPS (Sustainable Transport Energy Pathways) Program, Institute of Transportation Studies, UC Davis, produced cost curves for California RNG using technical estimates of resource availability and technology performance.
They incorporated those cost curves into a spatial model by determining the quantity of renewable natural gas that could be supplied under different competitive landscapes. They first considered scenarios that begin in 2013 at commodity natural gas prices of roughly $3.00/mmBTU and extended over a decade or two into the future when the competing fuel is fossil natural gas at prices available in the natural gas futures and derivatives market. Those derivatives prices generally ranged from $2.80 per mmBTU and $4.15 mmBTU over the modeling period. (All costs and prices in the model are in 2015 constant dollars.)
The calculations considered the most commercially optimal combination of technologies, equipment, feedstocks, and size/scale of facilities to meet rising demand for transportation fuel for major trucking routes in the state.
They found that RNG can achieve significant market penetration of 14 bcf into the transportation fueling infrastructure by the 2020s with California’s Low Carbon Fuel Standard (LCFS) credits at current levels of $120 per metric ton of CO2. Higher volumes are possible, as LCFS credits become more valuable and technological learning and scale economies lower upfront capital costs.
Of the 14 bcf projected total, 6.3 bcf would come from landfill, 1.5 from waste-water treatment, 1.75 from municipal solid waste (MSW), and 4.3 from dairy. Adding in credits from the Federal Renewable Fuels Standard of $1.78 per gallon of ethanol equivalent ($23.32 per mmBTU), all four sources of gas increases from 0 bcf to 82.8 bcf, which would be equal to five times the current transportation natural gas used in California, of which 50.8 bcf would be from landfill and 5.6 bcf from waste-water treatment, 16.3 bcf from municipal solid waste, and 10.1 bcf from dairy.
The cost differentials for various RNG pathways reflect differences in the level of specialized technology and infrastructure that is needed to bring the biogas to commercial commodity quality standards. For RNG from dairies and municipal solid waste, greenfield AD facilities must be constructed from scratch whereas the collection and upgrading equipment needed for landfill and WWTP is less capital intensive. The relatively low methane yields of manure also contribute to making manure RNG less competitive. Capital costs of AD are about a third of total capital requirements while the other two thirds are upgrading and injection infrastructure costs. The gas from landfills and waste water treatment plants may require more upgrading or more expensive monitoring equipment than we have assumed in our estimates in order to meet California gas quality standards.—Final Draft Report
The STEPS team also found that the level of landfill tipping fees—the charge on a given quantity of waste entering the landfill—is an important factor. Landfill tipping fees vary widely; any change in the level of landfill tipping fees will have a material impact on the quantity of RNG from MSW that could be economically diverted to a digester, the authors found.
If tipping fees were raised 20%, RNG production from MSW sources that could be used in a municipal digester would increase from 1.75 to 12.4 bcf per year under a $120 per metric tonne of CO2e LCFS credit price. In other words, the authors found, increased tipping fees and carbon credits could create an incentive to produce more RNG since the municipality could save both the cost of the tipping fees and receive a LCFS credits with the combined value providing more than $13.00 per mmBTU of price support subsidy.
Overall, this study demonstrates that regulatory policy, combined with market pricing of environmental externalities, should be sufficient to attract new entrants to the renewable natural gas business in California.—Final Draft Report
Amy Myers Jaffe et al. (2016) “Final Draft Report on The Feasibility of Renewable Natural Gas as a Large-Scale, Low Carbon Substitute” Contract No. 13-307