By Jaclyn Kahn
As states consider clean energy goals and efforts to reduce emissions across the transportation and power sectors, some state legislatures, utilities and the natural gas industry are examining the potential for renewable natural gas (RNG).
RNG is biogas consisting primarily of methane and carbon dioxide. While carbon dioxide is a widely known greenhouse gas, methane is actually 25 times more potent than carbon dioxide over a 100-year period at trapping radiation.
This biogas is the byproduct of organic matter that decomposes in anaerobic, or zero oxygen, environments. Because it is a byproduct of organic waste such as food waste and manure, RNG is most often sourced from solid waste landfills, livestock operations and wastewater treatment plants.
In these locations, methane and carbon dioxide are inevitable byproducts of the industries. RNG allows these byproduct gases to be harnessed through capture and purification processes so the gas can become pipeline-quality fuel.
RNG can be used to power or fuel anything that currently operates on natural gas, including electricity and heating. Some states are considering the potential of RNG to help meet greenhouse gas emission reduction goals.
The process of capturing RNG does not create new carbon emissions, but rather, recycles carbon that was already in circulation. According to the American Gas Association, RNG is a positive part of a state’s energy portfolio due to its potential for job development, new streams of revenue for farmers and U.S. energy security.
While these are all factors in the expansion of RNG, Renewable Portfolio Standards (RPS)—which require a state to reach specific electricity portions derived from renewable resources—have also spurred states to increase their focus on RNG.
For example, New York considers biogas from sources like landfill and manure digestion to be Main Tier Eligible Electric Generation Sources, which are the primary sources used to reach their RPS. New Hampshire considers biomass and methane sources to be a Class III renewable energy source, which they aim to be about 8% of their energy mix until 2025 per their RPS. Renewable Fuel Standards also include RNG as a renewable fuel source and is another factor spurring interest in its use.
Many states have proposed legislation relating to RNG and to date, seven have enacted policies: California, Colorado, Nevada, New Hampshire, New Jersey, Oregon and Washington. Texas is in the preliminary stages of studying the feasibility of RNG through its Texas Bioenergy Policy Council and Committee and other states have already implemented programs.
Many of these policies focus on creating financial incentives for infrastructure build-outs given one of the key challenges to harnessing biogas is proper equipment such as anerobic digesters as well as pipeline infrastructure.
California’s AB 2313, enacted in 2016, incentivizes using biomethane through a financial incentive program. This program creates incentive payments that can be used toward the interconnection costs of transporting biogas to processing centers primarily from dairy cluster projects—defined as three or more dairies that are in close proximity. While this statute was scheduled to expire in 2021, its continued support has resulted in SB 457, which extended these incentives until 2026.
Another state approach to RNG is through tax exemption legislation. In 2018, for example, Washington passed HB 2580, which created sales and use tax exemptions for RNG equipment. The tax incentives can be used to purchase anaerobic digesters which facilitate the expansion and use of RNG.
Other states, such as Oregon and Nevada, have focused on RNG infrastructure development through cost-recovery measures for utilities which are constructing pipelines and purification facilities.
In particular, Oregon’s SB 98, enacted in 2019, creates specific incentives for the cost recovery of RNG investments in pipelines, connections, and other infrastructure and equipment. This is furthered through the creation of an RNG target—30% RNG use by 2045-2050—which is up from the current goal of 5% RNG by 2020-2024.
While this goal is not binding like other states’ RPS, it is aimed to create a further incentive for utility companies to increase investment in a future lower carbon economy. In addition, Colorado considered SB 154 in 2020 which aimed to create similar RNG targets—5% RNG by 2025 and 15% by 2050. Comparable cost recovery measures were also implemented in Nevada’s SB 154 from 2019, although with the added stipulation that the utility company must prove an environmental benefit to the state due to a decrease in greenhouse gas emissions to qualify for the measures.
The increase in state legislative action regarding RNG since 2018 is likely to continue. As states work to overcome the economic hardship of COVID-19, industries with the potential for job development and energy security, like RNG, will likely remain of interest. This economic focus, in tandem with states’ renewable targets, will likely continue the legislative interest in RNG.
Jaclyn Kahn is an intern in NCSL’s Energy Program.