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Critics say tracking renewable natural gas production and sales will be difficult and present opportunities for fraud.
North America’s first pilot project allowing companies to claim environmental credits for renewable natural gas may be a boon for utilities providing home heating.
The Minneapolis-based Midwest Renewable Energy Tracking System (M-RETS) will begin in July creating “renewable energy certificates” (RECs) produced from the manufacture of renewable natural gas — methane captured from landfills, sewage plants, farms, and other sources. In the past, the credits have been mainly awarded for solar, wind and hydropower in the electric sector.
CenterPoint Energy, Minnesota’s largest natural gas provider, has signed on as the first client for the REC program. Minnesota regulators are studying whether to approve CenterPoint Energy’s own renewable natural gas green tariff program.
Renewable natural gas mainly has been used as a transportation fuel to meet the federal government’s Renewable Fuel Standard or California’s Low Carbon Fuel Standard. Adding renewable energy certificates to renewable natural gas production potentially opens a huge residential and commercial heating and industrial market.
And with that move comes the potential to upend the goal of electric utilities and clean energy advocates to decarbonize space heating through electrification. Advocates also note that the production of these fuels poses other environmental problems, and that properly tracking the credits will be difficult and can present opportunities for fraud.
Sam Wade, executive director of the Renewable Natural Gas Coalition, predicted that the M-RETS initiative will grow quickly in the home heating market.
“There are producers looking at home heating as a longer-run play because the transport market is limited and not growing quickly,” he said. “The demand will grow faster in the home heating market, I believe, than the transport sector.”
Reducing carbon through renewable natural gas
Reaching a green audience is the goal of CenterPoint Energy’s renewable natural gas program, which was the impetus for the REC. The company’s goal is to attract 8,000 people, or 1% of its Minnesota customer base, to the program. Customers would assign a monthly dollar amount to support renewable natural gas.
Nick Mark, CenterPoint Energy’s conservation and renewable energy policy manager, said the renewable natural gas REC and approval from Minnesota regulators for the utility’s program could jumpstart the industry.
“We will see more rapid growth in both Minnesota and around the county once some of those elements are in place,” he said. ”Having a REC is important in two ways. It allows for the development of a market and it allows us to say we bought [renewable natural gas] from this producer at this point and retired the RECs, or we bought more than we needed but we sold it to X company.”
Having a large utility willing to enter into long-term contracts would give renewable natural gas producers confidence to build out their systems to serve customers beyond the California and federal markets, he said.
How much greenhouse gas could be reduced remains a question, Mark said. Much of that depends on the lifecycle of the feedstock used by producers. Dairy farms have a higher value than landfill gas, for instance, he said.
The criticism that renewable natural gas could only replace a small amount of fossil fuel natural gas does not consider electrification, Mark said. As demand for natural gas slackens, renewable natural gas will represent a larger share of a dwindling market. “The whole point is to use less natural gas,” he said.
Ben Gerber, M-RETS’s executive director, said renewable natural gas will find a larger market quickly because many parts of the economy, including some manufacturing processes, will be expensive and difficult to electrify.
It can reduce greenhouse gases by capturing methane that in some cases would simply enter the atmosphere from dairy and hog farms, landfills, wastewater facilities and other sources, Gerber said.
Heating, air conditioning and gas appliances were responsible for 29% of greenhouse gases in 2017, Gerber said. Without “attention to thermal energy and its associated carbon emissions” states and nations will not reach their carbon reduction goals, he said.
“It’s a huge business opportunity and it’s definitely a trending issue,” Gerber said. “We see the REC growing and eventually incorporating all renewable thermal fuels such as renewably sourced hydrogen.”
Industry promoters agree. Blaine Collison, senior vice president of David Gardiner and Associates, said the REC — and the validation that comes with it — is “critically important to opening markets and allowing capital to flow, and enabling consumer choice.”
David Gardiner and Associates manages the Renewable Thermal Collaborative, which represents large thermal buyers looking to purchase clean renewable heating and cooling fuel, among them Cargill and Kimberly Clark.
Collison sees the renewable thermal market as looking like the electricity market a decade ago. That’s when wind and solar began to have a much greater impact than ever before.
Renewable electricity had “a clearer set of technology pathways” such as wind and solar than does renewable thermal. Yet the REC development not just by M-RETS but other organizations will inevitably create new markets that will propel greater adoption, he said.
Renewable natural gas raises concerns
A market for biomethane could help owners of industrial and agricultural facilities deal with waste methane by turning it into a commodity, which could, in turn, utilize existing natural gas infrastructure.
But many scientists dispute whether renewable gas can ever be truly green. Gerber argued the REC will be based on scientifically validated principles developed by Argonne National Laboratory and used by the California Air Resources Board as the framework for its Low Carbon Fuel Standard.
Both go into a “granular” level of detail that involves what machines are used for production, the kind of anaerobic digestion and other factors of manufacture. The REC will have a carbon pathway map available for regulators and others who want more detail.
The Center for Resource Solutions is working on a thermal standard that could be applied to the REC that M-RETS has developed, he said. As part of its “Green-e” program, the San Francisco-based nonprofit has underway a renewable natural gas standard that should be done by the middle of next year.
The center declined to comment on the project. Gerber said depending on market conditions, M-RETs could move to incorporate the standard developed by the thermal Green-e certification. “We support and value what they do,” he added.
The REC will not require the gas to be delivered to any particular state, he said, although the buyers could demand it. Whether any renewable natural gas is delivered into CenterPoint Energy’s Minnesota network would remain unknown, at least in the pilot.
The complexity of determining such environmental attributes concerns some clean energy organizations. Making sure each “batch” of renewable natural gas — from landfills, wastewater plants or other sources — “is calculated properly is important and it’s more nuanced than wind or solar energy,” said Margaret Cherne-Hendrick, senior policy associate for Fresh Energy, a Minnesota-based policy organization that also publishes the Energy News Network.
Fraud also has been an occasional problem in the federal renewable fuel standard, she said, especially since visits will not be part of the REC pilot to ensure the veracity of the gas supply.
Suppliers will register once with M-RETs rather than annually, which could lead to misrepresentation of feedstocks in the future, Cherne-Henrick said. A renewable natural gas supplier could change feedstocks that may have a higher or lower carbon intensity than those listed in the initial registration, she noted.
Those issues can be solved, Gerber believes. As he sees it, the new M-RETS thermal energy certificate “will cost effectively” help companies to “track and verify their renewable thermal usage while understanding the associated [greenhouse gas] impacts.”