The volume of methane gas from trash, animal manure, sewage sludge and other feedstock transforming into renewable natural gas (RNG) is expected to reach new heights, soaring tenfold to 4 Bcf/d by 2050, analysts say.

This comes as the clean energy push drives investment, stimulated by federal incentives and mandates. The forecast released July 17 by Wood Mackenzie follows a year in which 60 MMcf/d in new RNG production capacity was added with 66 future projects announced. Wood Mackenzie forecasts another 70 MMcf/d of new RNG supply will be added in North America in 2024 as the Inflation Reduction Act (IRA) accelerates growth.

Of about 385 MMcf/d of RNG produced today, Texas leads the market with 62 MMcf/d, followed by California and Pennsylvania with about 33 MMcf/d each, Wood Mackenzie said. Looking at feedstock, landfills have the greatest share of capacity.

“Today, the RNG market is largely driven by mandates and green initiatives aimed at reducing greenhouse gas emissions in the transportation sector,” Natalia Patterson, senior research analyst with Wood Mackenzie, told Hart Energy. “However, increased voluntary participation from utilities and industrial companies has the potential for RNG demand from these sectors to exceed the transportation demand.”

RNG developer Vanguard Renewables’ recent deal to provide RNG to pharmaceutical company AstraZeneca is an example of such demand growth, she added. The deal enables as much as 650,000 MMBtu per year of RNG to be used at AstraZeneca’s U.S. sites by 2026, Vanguard said.

Produced from biogas, RNG is formed when contaminants such as CO2, water and hydrogen sulfide are removed from methane to elevate the gas into pipeline quality. RNG can be used in the same ways as fossil gas.

With a carbon intensity that can be five times lower than fossil natural gas, RNG can considerably reduce emissions when used as a transportation fuel, according to Patterson.

Appetite for RNG, including that of utilities, continues to grow as projects move from construction to operation with more in the pipeline.

Producing RNG

Houston-based WM, the collection, recycling and disposal service company previously known as Waste Management, is among the companies producing and using more RNG. This week, the company said it opened a new $35 million RNG facility called WM Eco Vista RNG in Springdale, Arkansas.

The 14,430-sq-ft facility processes biogas from the landfill for delivery to Energy Transfer’s Enable Gas Transmission pipeline system. By displacing fossil fuels, WM estimates RNG produced at the facility will prevent about 40,000 tons of greenhouse gas (GHG) emissions annually.

“Landfills are a vital part of any community, and it is essential that landfills continually invest in environmental stewardship,” Eddie McManus said, WM’s mid-South area vice president.

WM is eyeing the development of about 20 RNG projects as part of its more than $1 billion investment in renewable energy. Its initiatives include running its compressed natural gas trucks on RNG.

Speaking in April during WM’s Sustainability Investor Day, WM Vice President of Renewable Energy Shahid Malik said the company has “all the ingredients of a winning platform” to meet growing demand for RNG.

“In this first phase of our RNG plant build-out by the end of 2026, just three years from now, we expect to produce eight times what we’re producing today, or another 25 million MMBtus to add to our existing 3 million MMBtu,” Malik said. “At the same time, we plan to increase our beneficial use of landfill gas to 65%, and we expect to add $500 million in incremental operating EBITDA and financial returns that exceed traditional WM investment returns on capital.”

The projections include between $250 million to $350 million more in benefits from investment tax credits the company may accrue, he said.

Demand drivers

RNG became more attractive with the passage of the U.S.’ IRA. The act made biomass and landfill gas projects eligible for the production tax credit. Low-carbon fuel programs in the Environmental Protection Agency’s Renewable Fuel Standard program is also driving activity, according to Wood Mackenzie.

Plus, regulatory moves by states are stimulating demand for RNG.

In Colorado, for example, a group of utilities looking to shrink their carbon footprints have put out a joint request for information seeking Colorado RNG developers. The utilities include Atmos Energy, Black Hills Colorado Gas, Colorado Springs Utilities and Xcel Energy. Developers, marketers and other RNG providers have until July 31 to respond to the request.

Public gas utilities in Colorado with more than 90,000 retail customers are required to lower GHG emissions as part of the state’s Clean Heat Plan. Targets are to cut GHG emissions from 2015 levels 4% by 2025 and 22% by 2030.

Despite the mandates and push to lower emissions, Wood Mackenzie pointed out that RNG comprises less than 1% of North America’s natural gas market.

Other challenges include high production costs, which Patterson said vary by project but can exceed $30/MMBtu compared to traditional natural gas trading below $3/MMBtu at Henry Hub this summer.

“Renewable credits from programs like Renewable Fuel Standard in U.S. and Clean Fuel Standard in Canada are required for RNG to compete with traditional natural gas,” Patterson said. “RNG developers also face difficulties with accessing the pipeline network and receiving the financial support outside of the transportation sector.”

Analysts forecast policy support and technology development could lift the market share to 3% by 2050.

“But we will also need to see voluntary efforts as well, particularly from the industrial sector as more firms commit to low carbon initiatives,” Patterson said in a news release. “The growth in the industrial sector would have the potential to dwarf traditional RNG demand in the transportation sector.”

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