Canada: People Are Excited About Renewable Natural Gas, But Why Aren't We Seeing More Of It?

Renewable natural gas (RNG) is produced by capturing, upgrading and utilizing methane produced from the decomposition of organic materials. A number of organic feedstocks can be utilized to make renewable natural gas, including manure, agricultural by-products, organics, waste from water treatment plants and methane emitted from landfills. The raw gas produced by organic feedstocks is called biogas and generally consists of methane, carbon dioxide, water and other impurities. Once processed, RNG can be injected into natural gas distribution networks or used as fuel in heating, electricity or transportation.

According to the Coalition for Renewable Natural Gas, there are 11 RNG facilities operational, planned or under construction in Alberta:¹

The costs behind RNG production

RNG is expensive. Generally, large-scale RNG is not yet commercially viable on a large scale without incentives and grant programs. RNG remains very expensive compared to other natural gas sources, especially natural gas. According to a 2019 study prepared for the American Gas Foundation, about 44 percent of prospective RNG projects can be developed at a cost of CA$7 to CA$20 per metric million British thermal unit (MMBtu),⁸ with a median cost of approximately CA$18. The remaining 56 percent of potential projects exceed CA$20 per MMBtu.⁹ There are currently three main reasons that this cost discrepancy exists: (i) availability and issues obtaining feedstock; (ii) the location of the RNG facility in regard to the energy transport infrastructure; and finally, (iii) the cost of upgrading certain types of feedstock (including the current state of RNG upgrading and purification technology).

i. Availability and procurement of feedstock

RNG is reliant on a steady supply of landfill and agricultural waste (with the most likely sources of RNG feedstock being landfills and industrial dairy farms). Each RNG facility will need to procure enough long-term feedstock supply to ensure continuous operations. This can be difficult due to the cyclical nature of certain types of agricultural waste, as well as supply and demand issues created by more RNG facilities vying for the same resources.¹⁰

ii. Location

Not only do large-scale RNG facilities require easy access to long-term feedstock, but they also require pipeline and/or electrical grid access. Finding a goldilocks location can be a challenge, and if a suitable location is not found, project proponents will need to build out infrastructure access in addition to the technical infrastructure required for their facility. As a result, this extra expense can significantly increase the upfront costs of a prospective RNG facility.

iii. The cost of upgrading feedstock

The final and main cause for RNG's high price point is that the cost of upgrading feedstock to RNG can be incredibly high. This is caused by two main reasons: (a) the type of feedstock being used, and (b) the current state of RNG upgrading technology.

a. Type of feedstock

Both landfill and wastewater naturally create biogas that need only be collected, upgraded, and injected into a pipeline transportation network.¹¹ However, RNG created by feedstock from dairy farms or food waste must go through a conversion process of anaerobic digestion in order to produce the necessary biogas for the creation of RNG. This conversion process can be costly, and according to the Institute of Transportation Studies at UC Davis, can vary in cost from US$13 per MMBtu to US$100 — this exists in addition to the standard upgrading and transport costs.¹² As a result, facilities using feedstock other than landfill or wastewater biogas often need to offset this high conversion price tag by increasing the downstream price of RNG.

b. Technological barriers

Both RNG and liquified natural gas (LNG) must be stripped of impurities and upgraded to a liquid gas form during the production process. Once upgraded, the fuels become functionally identical and can be transported and used interchangeably. Currently, the liquefaction and upgrading costs of RNG can be significantly higher than LNG. This is primarily due to technological advances related to the liquefaction and purification process of natural gas.¹³ Consequently, LNG can be upgraded and liquefied for roughly US$4 per MMBtu in Western Canada.¹⁴ This is in stark contrast to RNG, which, according to the Institute of Transportation Studies at UC Davis, can cost anywhere from US$6 to US$180 per MMBtu to be liquified and upgraded.¹⁵

As a result of this technological gap, as well as the potential high cost of converting certain types of feedstock to an upgradeable biogas, LNG projects can often be economically viable selling gas at a fraction of the cost of current RNG projects. Consequently, similar to other non-fossil-fuel forms of energy, RNG has faced uptake barriers due to the increased cost of energy to the consumer. However, as RNG conversion and upgrading technology advances, and energy transportation networks expand, we may see the high downstream cost of RNG decrease with time.

Special thanks to articling student George King for his assistance writing the article.

Footnotes

1. https://www.rngcoalition.com/?

2. https://www.cbc.ca/news/canada/calgary/new-30m-alberta-biofuel-plant-largest-of-its-kind-in-canada-1.2451060 ?

3. https://www.eralberta.ca/projects/details/source-separated-organics-and-agricultural-waste-anaerobic-digester/ ?

4. https://www.eralberta.ca/projects/details/new-production-system/ ?

5. https://majorprojects.alberta.ca/details/Lacombe-BioRefinery/4248 ?

6. https://www.atco.com/en-ca/business/energy-infrastructure/renewable-natural-gas.html ?

7. https://www.eralberta.ca/projects/details/clover-bar-landfill-gas-to-renewable-natural-gas-project/ ?

8. 1 MMBtu = 1.0555056 GJ. ?

9. https://gasfoundation.org/wp-content/uploads/2019/12/AGF-2019-RNG-Study-Full-Report-FINAL-12-18-19.pdf ?

10. https://www.greenbiz.com/article/7-things-know-about-renewable-natural-gas ?

11. https://ww2.arb.ca.gov/sites/default/files/classic/research/apr/past/13-307.pdf?

12. https://ww2.arb.ca.gov/sites/default/files/classic/research/apr/past/13-307.pdf?

13. https://iopscience.iop.org/article/10.1088/1755-1315/983/1/012051/pdf ?

14. https://iopscience.iop.org/article/10.1088/1755-1315/983/1/012051/pdf ?

15. https://ww2.arb.ca.gov/sites/default/files/classic/research/apr/past/13-307.pdf?

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