Author: Peter Weisberg

Peter Weisberg is a director on the Carbon Markets team, where he manages the company's renewable natural gas work.

Renewable Natural Gas – A new tool to address natural gas emissions

Field of grains

Many organizations have successfully mitigated their electricity emissions by leveraging a variety of methods of sourcing renewable electricity – from on-site clean energy generation, to power purchase agreements, to matching electricity consumption with energy from renewable sources, and more. However, reducing direct greenhouse gas (GHG) or Scope 1 emissions that result from sources owned or controlled by an organization, such as emissions from combustion in furnaces or vehicles, is substantially more challenging. And, as a growing number of organizations commit to aggressive science-based targets (SBTs), finding ways to address Scope 1 emissions is essential to fulfilling existing commitments.

Until recently, electrification, energy efficiency, and carbon offsets were the primary options available to address Scope 1 emissions from natural gas. However, there is a growing demand for a new tool:  renewable natural gas (RNG). The expanded use of RNG and the emerging accounting framework of RNG Certificates provides a new pathway for organizations to eliminate Scope 1 emissions, helping to achieve GHG reduction goals and mitigate the environmental impact of doing business, while creating a pathway to mitigate emissions from hard to electrify natural gas applications.

While the opportunity to use RNG Certificates to address Scope 1 emissions is an attractive option for many companies, it’s important to understand how they work and the nuances associated with different project types

What is Renewable Natural Gas (RNG)?

Renewable natural gas refers to “biogas” or methane captured from the decomposition of organic waste in landfills or anaerobic digesters that process waste from food processing plants, livestock facilities, or wastewater treatment plants. This methane gets captured, cleaned, and injected into the national natural gas pipeline, adding a climate-friendly alternative to fossil fuel.

RNG-certificates

The methane that’s captured from RNG projects is a potent greenhouse gas that, in many cases, would have otherwise been released into the atmosphere and is instead converted into renewable energy. Because the feedstock is renewable, the carbon emissions that result from combusting RNG are considered biogenic – like the carbon emissions from other sustainable biofuels.

What is a Renewable Natural Gas Certificate?

An RNG Certificate (also sometimes called a Thermal REC, green gas certificate, or RNG credit) represents the environmental attribute associated with renewable natural gas and is an accounting mechanism to purchase RNG. Similar to electrons on a power grid, RNG cannot be distinguished from fossil fuel in the national pipeline. An RNG Certificate serves as the proof that the gas originated from renewable or biogenic sources. Similar to Renewable Energy Certificates (RECs), RNG Certificates are unbundled from the physical gas that’s injected in the pipeline, allowing organizations to apply them to their existing gas use in order to purchase RNG. The end-user of the RNG Certificate can claim the environmental benefit of substituting RNG for conventional natural gas. This system of tracking and claiming environmental attributes is often referred to as “book-and-claim accounting.”

Common carrier pipelines interconnect North America

Map-EIA-pipelines

Source: Energy Information Administration, Office of Oil & Gas, Natural Gas Division, Gas Transportation Information System

In almost all cases, companies can purchase RNG through the procurement of RNG Certificates without changing their existing gas purchase agreements. RNG is generally injected into the national common carrier pipeline network from which companies looking to mitigate their footprint receive gas. RNG Certificates therefore provide direct Scope 1 reductions without needing to fundamentally change energy procurement or on-site infrastructure.

While this “book-and-claim” accounting with RNG Certificates is used currently under the Environmental Protect Agency and California Air Resources Board transportation programs, the market beyond transportation is nascent. Standard-setting processes and market studies are being undertaken across the country in order to ensure environmental integrity and consumer protection are prioritized as the market expands. As part of this process, 3Degrees has joined a workgroup at the Center for Resource Solutions to develop a standard f0r voluntary customers looking to purchase RNG Certificates to mitigate their Scope 1 emissions, similar to the standards developed to benefit voluntary purchasers of RECs and offsets. This standard is anticipated to be completed in 2020. (A first draft was released for public comment in April.)

How can RNG Certificates help organizations achieve GHG reduction targets?

The Carbon Disclosure Project (CDP) provides guidance for greenhouse gas accounting with RNG Certificates– and there are fundamental differences from carbon offset reporting and Scope 1 emissions.  With carbon offsets, an organization is required to report all Scope 1 carbon emissions from gas consumption and then show that those emissions have been matched with offsets.  With RNG, companies report zero carbon emissions from any natural gas consumption that is matched with RNG Certificates, eliminating Scope 1 emissions associated with natural gas. 

RNG-certificates-Carbon-offsets

What is the future potential of Renewable Natural Gas?

While renewable natural gas offers another viable option for organizations looking to address their Scope 1 emissions, one commonly noted drawback is its limited supply. Optimistic estimates, like American Gas Foundation’s Renewable Sources of Natural Gas 2019 paper, conclude that RNG can supply no more than a third of current natural gas consumption. However, with a rapidly increasing number of methane capture projects coming online, the projected near-term growth for RNG supply is positive. And with limited demand from the transportation sector, which currently has the greatest incentives, organizations can leverage this untapped potential as another tool, alongside energy efficiency, electrification, and carbon offset investments, to eliminate or mitigate Scope 1 emissions.

Considerations for Renewable Natural Gas Purchasers

RNG is new and faces its own complicated set of options. It’s essential for buyers to consider the following variables: 

  • Feedstock: The cost, carbon-intensity and co-benefits of RNG vary widely depending on the source of the biogas. Buyers need to weigh tradeoffs and be aware of the price impacts of feedstock-specific preferences. 
  • Environmental integrity: While voluntary standards are emerging, project due diligence is key to ensuring real environmental benefits. Buyers need to ensure that projects are real, have proper measurement and metering of gas flow, align with emerging standards for the voluntary market, and have safeguards in place to prevent double counting.  
  • Temporal matching: The voluntary market currently does not have any standards for the time period over which RNG Certificates from RNG injected into the pipeline can be matched with gas consumption; buyers should monitor emerging standards around this guidance and be aware of this “vintage” of the product they are purchasing.  
  • Price: RNG is expensive. Production costs alone can be $10/MMBTU or more. Buyers are also often competing with lucrative transportation market incentives. Buyers need to be aware of how long-term contracts can affect these prices. 
  • Geography: Because the common carrier pipeline interconnects the entire United States, companies can source projects from anywhere in the United States and make valid emission reduction claims. Companies may, however, choose regional methane capture projects to provide co-benefits to their business and community. 
  • Co-benefits: Beyond the energy source produced by methane-capture, co-benefits like air and water quality improvements and local economic benefits can increase the positive impact of an organization’s RNG investment. 

Matching RNG certificates to natural gas use is a direct and immediate way to address Scope 1 carbon emissions. When integrated with energy efficiency initiatives, electrification, and carbon offset investment, RNG can be a meaningful tool in a company’s comprehensive GHG emissions reduction strategy.

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Interested in learning more about how RNG can be integrated into your company’s climate plan? Get in touch with us.