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The Feasibility of Renewable Natural Gas as a Large-Scale, Low Carbon Substitute


Research Report

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Suggested Citation:
Jaffe, Amy Myers, Rosa Dominguez-Faus, Nathan C. Parker, Daniel Scheitrum, Justin Wilcock, Marshall Miller (2016) The Feasibility of Renewable Natural Gas as a Large-Scale, Low Carbon Substitute. Institute of Transportation Studies, University of California, Davis, Research Report UCD-ITS-RR-16-20

The emergence of natural gas as an abundant, inexpensive fuel in the United States has raised the possibility of using natural gas in transportation. Growth in natural gas fueling infrastructure improves the prospects for the development of a commercially viable renewable natural gas (RNG) industry in the state of California, with distribution into the existing transportation fueling system.

The development of alternative fuels that have low greenhouse gas and criteria pollutant emissions, such as renewable natural gas, are vital for the state of California to meet climate change and air quality goals. This study examines the feasibility of producing large quantities of renewable natural gas fuels for use in transportation in California. The study’s results indicate that there are substantial sources of RNG in California that are commercially competitive with existing fossil fuel-based transportation fuels because carbon externalities are taken into consideration in the California market through existing programs such as the Low Carbon Fuel Standard (LCFS) and the U.S. Renewable Fuels Standard (RFS).

At current credit prices including California’s LCFS and the U.S. federal RIN credits, up to 82 billion cubic feet per year (bcf/y) of RNG supply could be attractive for private investment at competitive rate of return in developing RNG sources from landfill, dairy, municipal solid waste and waste-water sites combined. We find that the LCFS credit of $120 per metric tonne of CO2, if taken alone enables up to 14 bcf of RNG into the transportation fueling infrastructure over the study period, 6.3 bcf from landfill, 1.5 bcf from waste-water treatment, 1.75 bcf from municipal solid waste, and 4.3 bcf from dairy. The analysis also shows that increasing tipping fees for municipal solid waste can influence private investment in RNG. To be specific, 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 LCFS credits with a combined value providing over $13.00 per mmBTU of price support subsidy. Tipping fees are unique to the MSW RNG pathway and preventing MSW sites from capturing the tipping fees would make a straightforward waste to landfill option more expensive and less commercially viable. A potential ban to landfilling would be equivalent in our modeling to an extremely high tipping fee that would increase the appeal of converting the waste to biogas. All dollar values are in 2015 dollars.

Landfill gas is the largest potential source of RNG. With carbon credits or other financial incentives, such as LCFS and RFS RINs, of at least $3.75 per mm BTU, large landfill could produce 6.3 billion cubic feet per year of RNG. However, if the gas from landfills and waste water treatment plants at a particular site require more upgrading or more expensive. The study investigates the impact of California’s quality standards for RNG and distance to central distribution systems on the level of investment in certain kinds of RNG. Upgrading costs are significant for all technologies but the range in upgrading costs is directly resulting from the range of biogas production scales. The dairies are especially limited in their ability to achieve the scale required to bring the cost of upgrading into an economically viable range. One key conclusion of the study’s comparison of costs is that clustering of the dairies is very important to lowering the cost of RNG by 60% compared with non-clustered systems using the same digester technology.

Finally, the study investigates the sensitivity of features influencing the climate performance of RNG on a life cycle analysis basis. Analysis reveals that vehicle produced methane emissions constitute a larger influence of overall carbon performance for LNG than in CNG. Use of landfill gas on-site instead of being sent elsewhere via pipeline reduces carbon emissions by up to 67%, indicating a clear climate benefit to avoiding pipeline transmission. For wastewater treatment plant biogas and manure renewable natural gas shifting LCA analysis from flaring to venting brings a substantial reduction in carbon intensity of RNG.

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.