Recent announcements by Southern California Gas (SoCalGas) indicate renewable natural gas (RNG) will increasingly contribute to efforts to decarbonize the state’s transportation fuel sector. RNG’s share of natural gas supply in California’s transportation sector grew from approximately 10% in 2013 to 70% in 2018, reaching more than 30 million diesel gallon equivalent, or about 45 million cubic feet per day, for the first time during the third quarter of 2018.
RNG, or biomethane, is a renewable fuel produced through the anaerobic decomposition of organic matter at facilities such as landfills, wastewater treatment facilities, and dairy farms. Biomethane is produced either through anaerobic digestion or via gasification, and purified in order to meet pipeline quality standards.
RNG has been increasingly consumed as part of California’s Low Carbon Fuel Standard (LCFS), which is part of California’s 2006 Global Warming Solutions Act (Assembly Bill-32), to reduce the carbon intensity of the state’s transportation fuel sector by 20% by 2030 relative to a 2010 baseline. Regardless of the origin of the natural gas at transportation fueling stations, the volume of biomethane injected into the pipeline system can be credited as either bio-compressed natural gas (bio-CNG) or bio-liquefied natural gas (bio-LNG). Bio-CNG and bio-LNG is commonly used as an alternative to diesel fuel for heavy-duty vehicle fleets. Growth in California’s RNG industry coincided with a 2014 final rule by the U.S. Environmental Protection Agency that allows RNG to register and qualify for cellulosic biofuel credits as part of the Renewable Fuel Standard.
Lifecycle greenhouse gas (GHG) emissions associated with RNG producer pathways are typically lower than comparable fossil fuel pathways. Low carbon intensity (CI) fuels below the LCFS annual threshold generate credits, which can then be sold to regulated parties (refiners, importers, and marketers of petroleum products) who need to offset deficits generated by fossil fuels or other fuels with CI scores above the annual threshold. RNG accounted for about 7% of LCFS credits during the first three quarters of 2018.
Throughout most of the program’s history, LCFS credits traded below $100 per metric ton of carbon dioxide equivalent (mtCO2e). Increasing LCFS credit prices, averaging over $150/mtCO2e through the first three quarters of 2018, indicate regulated parties are having greater difficulty in meeting annual carbon intensity targets. Higher LCFS prices have generally caused low CI fuels to enter the California market and provide an incentive to displace fossil fuels. Credit prices are capped at an inflation-adjusted $200/mtCO2e level.
Recent developments suggest RNG will continue to play an important role in California’s effort to decarbonize its economy. SoCalGas, which serves roughly 21 million customers across Central and Southern California, announced a goal to replace 5% of its total natural gas supply with RNG by 2022 and increase that amount to 20% by 2030.
An increasing amount of RNG is being produced in California. In February 2019, Calgren recently began to inject RNG into SoCalGas pipelines from a dairy cluster in Tulare County, CA that captures methane produced by the manure of more than 75,000 cows. The facility is estimated to produce over 2 billion cubic feet (Bcf) of natural gas per year, and additional dairies are expected to join the cluster to potentially create the largest facility of its kind in the United States. Additionally, CR&R Environmental’s anaerobic digester facility in Perris, California, a city approximately 70 miles east of Los Angeles, recently started to inject RNG into SoCalGas pipelines in 2018. Biomethane is produced from green waste that is collected from municipalities surrounding the Los Angeles metropolitan area.