Report: Deloitte Reveals How RNG Powers a Sustainable Revolution

A new report from Deloitte Research Center for Energy & Industrials highlights the transformative potential of renewable natural gas (RNG) in public gas utilities, offering a sustainable solution for decarbonization efforts. With a focus on waste management and gas utility collaboration, the report reveals significant opportunities for partnerships, market growth, and revenue streams. The report highlights key findings and figures that are shaping the landscape of RNG in the waste industry.

The report explains that RNG stands at the forefront of public gas utility decarbonization efforts, embodying a circular approach to fuel production with versatile applications. Its significance extends to gas pipelines, power plants, natural gas vehicles, and thermal processes. Notably, municipal owners of gas distribution companies exert control over a substantial 75% of RNG feedstock, predominantly derived from solid waste (73%) and wastewater facilities (4%).

Waste from landfills and wastewater treatment emerges as the third-largest contributor to US methane emissions, highlighting a critical environmental concern. Alarming statistics reveal that less than 10% of municipal wastewater treatment plants currently capture biogas, with a mere 2% upgrading this captured biogas to valuable RNG. Even among publicly owned landfills, where untapped potential is considerable, only 28 out of 1,641 are currently engaged in RNG production. The report highlights a significant opportunity for fostering public-private partnerships that can effectively catalyze the RNG market, addressing both environmental and economic imperatives.

Looking at market potential, a 2023 study focused on New York City unveils the transformative potential of RNG, suggesting that up to 27% of fossil gas could be replaced with RNG derived from wastewater biogas and food waste. This volume of RNG is more than sufficient to power the city's entire heavy-duty truck fleet, exemplifying the tangible benefits of RNG integration. State-level studies, as seen in Michigan, further support this trend, indicating that municipal waste facilities could viably replace 8% of fossil gas consumption across various sectors. Deloitte's estimations predict that RNG from waste has the potential to displace 4.4% of the total US fossil gas demand, with an even greater impact in core gas customer demand and the chemicals subsector.

The financial landscape of RNG projects varies, contingent on the facility type and size. With estimated one-year costs of $42.65 per MMBtu for wastewater and $32.44 per MMBtu for landfills, the investment considerations are multifaceted. Recognizing the need for incentivizing the industry, the Inflation Reduction Act tax credits play a crucial role by covering up to 50% of qualifying biogas property value. However, the report stresses urgency, indicating a narrow window until December 31, 2024, for waste facilities to leverage these tax credits before their expiration.

In the energy market, a paradigm shift is happening with states, corporations, and utilities actively contributing to a burgeoning voluntary market for RNG. Long-term offtake agreements, coupled with federal renewable energy credits, form integral components of potential revenue streams. The success story of Keystone Sanitary Landfill in Pennsylvania serves as an exemplary model, showcasing the viability of partnerships and long-term offtake agreements. These agreements not only ensure stable pricing for buyers but also provide a consistent revenue stream for RNG producers, fostering economic sustainability.

As the horizon of renewable energy expands, recent Treasury guidance opens new avenues, allowing landfill RNG used in hydrogen production to qualify for Section 45V tax credits. Simultaneously, the Environmental Protection Agency (EPA) explores provisions to recognize electricity derived from RNG for electric renewable identification numbers, especially in electric vehicles. The looming expiration of federal tax credits in 2024 underscores the urgency for public gas utilities and waste facilities to proactively explore and capitalize on emerging opportunities within the RNG sector.

There is immense potential of RNG in waste management and gas utilities, emphasizing the need for strategic partnerships, technology implementation, and policy considerations. As businesses assess the evolving landscape of RNG, the findings present a compelling case for collaboration between municipalities, waste facilities, and gas utilities to drive sustainable energy solutions, meet decarbonization targets, and foster economic growth.