Power or Fuel: Making the Choice

Growing interest and new incentives have some biogas producers eyeing renewable compressed natural gas.
By Chris Hanson | April 26, 2014

When biogas project developers approach a new project, perhaps the biggest question on their agenda is, “What will we do with the biogas?” The answer  isn’t always obvious. A developer may produce power for sale to the grid, but there is increasing appeal in compressed natural gas (CNG) to offset fuel costs. In order to determine the best choice for a project, multitudes of market data and incentives should be navigated.

Wisconsin-based BioCNG LLC is one developer armed with experience in converting both landfill and digester gas into CNG. To produce it, raw biogas is sent through BioCNG’s patent-pending technology to remove hydrogen sulfide, volatile organic compounds, siloxanes and carbon dioxide. After leaving the BioCNG skid, the clean and concentrated biomethane can be used within a CNG dispensing system for onsite fueling. One of the company’s projects, the Sacramento Biodigester, was commissioned last May and provides fuel to Atlas Disposal refuse trucks. The facility processes 25 to 100 tons of food waste per day to produce biogas, which BioCNG converts to 500 to 1,500 gasoline gallon equivalents (GGE) of CNG vehicle fuel. BioCNG’s St. Landry Parish, La., facility uses 50 standard cubic feet of landfill gas each minute to produce 250 GGE per day for 15 sheriff and public works vehicles.

When developers upgrade their biogas to CNG, they can make fuel to power their facility’s vehicle fleet, either through engine conversion or purchasing new models. “There are a lot of fleet managers currently converting their fleets to CNG,” says Matt Davies, president of BioCNG.  “It is a much easier decision to turn their biogas into CNG if they already have CNG vehicles in the fleet. They are already familiar with the technology, and fleet managers are very pleased with the performance of the CNG vehicles so that ends up being an influencer to convert the biogas to CNG versus electricity generation.”  

State and national initiatives have been driving interest in biogas conversion technology. Some states, such as California, provide grant funding to push the economic drive behind the biogas market. Renewable CNG is generally half the price of gas and diesel, and in some areas, costs less than other types of CNG available at a fueling station. As a fuel, renewable CNG qualifies for D5 advanced biofuel renewable identification numbers (RINs) and meets the Society of Automotive Engineers J1616 fuel specifications, Davies explains. 

As electric power purchase contracts expire, producers understand they will be paid less for their electricity from utilities, due to market factors or regulations. Vehicle fuel is a path to maximize the value of biogas resources. BioCNG receives inquiries from biogas sites, such as dairy operations, asking about the option to convert to CNG production, Davies says. Other larger agricultural sites might even have the option to use both the biogas to generate electricity and use the excess gas towards CNG production to become energy neutral.

Building CNG Infrastructure

As of March, Illinois-based ampCNG witnessed the one year anniversary of the grand opening of its Chicago to Orlando compressed natural gas corridor. At the northern tail of the corridor in Indiana, the Fair Oaks CNG station uses renewable fuel produced using the biogas from 11,000 cattle at the Fair Oaks dairy farm anaerobic digester. The biogas is put through a Totara biogas upgrading system made by Greenlane Biogas, where it takes the biogas from 55 to 60 percent methane concentration to a 98 to 99 percent methane concentration.  The produced gas is then piped 2.5 miles to the CNG station to be used either in a CNG powered vehicle or inserted into the natural gas pipeline, explains Mark Maloney, director of business development at ampCNG.

The price of electricity is one of the factors a digester project needs to weigh when deciding what to do with the biogas. Relatively inexpensive electricity prices could lead to smaller returns; whereas, if there is a lack of opportunities for CNG fuel, the producer might not be able to move it. “The farm was lucky, that they have a large fleet there that can consume that fuel 24/7,” Maloney says. “They were in a unique position. Some digesters can clean it up to pipeline quality and sell it to a CNG station down the road or the next state over. It really just depends on the particulars around the project at the time.”

In the Fair Oaks farm case, the farm would have lost money combusting the gas into electricity since the price of power was so low, Maloney explains. “For years prior to the project, they were just flaring the gas,” he says. “Then larger trucks with natural gas engines came to the market, it gave them the opportunity to look at cleaning the gas up to supply their own fleet with fuel.”

Another reason for biogas producers to opt for CNG production over electricity generation could be to harness the full value of the fuel. When combusting biogas to sell electricity to the grid, the producer takes a hit on efficiency, depending on the generator. “With CNG, the producer is cleaning up the gas and getting paid for 100 percent of the energy,” Maloney explains. In that instance, the consumer of that gas is at the whim of engine efficiency as the fuel converts into mechanical power, he adds.

As of March, renewable identification numbers for CNG are currently worth more than renewable electricity certificates (RECs) in Indiana, Maloney says. The RECs are the attribute of 1 MWh of electricity production to meet renewable portfolio standards; whereas the renewable identification numbers (RINs)are equivalent to 1 ethanol gallon of fuel to meet the renewable fuel standard (RFS). “In some cases the RINs are worth more, others the RECs are worth more.”

Biogas’ Role in Gateway to the West

Just over 10 miles from Missouri’s St. Louis Arch, Waste Management is constructing its third landfill gas-to-natural gas facility after breaking ground near the Milam Landfill in Fairmont City, Ill., last fall. The facility is projected to process roughly 3,500 standard cubic feet per minute of landfill gas and will inject the cleaned-up gas into Ameren Illinois’s pipeline to fuel CNG powered truck fleets.

Waste Management has roughly 27 years of experience using landfill gas to produce electricity. It is carefully trekking into the CNG industry, as well, providing landfill gas to eight or nine third-party facilities, which clean it to pipeline quality. “We are new to the CNG business,” says Paul Pabor, vice president of renewable energy for Waste Management. “We are building our new one in Illinois, which will convert landfill gas to pipeline-quality natural gas. We will inject it in the pipeline and contractually use it in our CNG fueling stations to fuel our trucks.”

Electricity generation is popular among biogas project developers for multiple reasons. The power technology has more than 30 years of precedence, the fuel requires relatively little gas cleanup, and engine manufacturers are making engines that run on raw biogas, says Pabor. Most of the incentives available are geared more toward electricity generation, he adds.

“Many of the incentives for using landfill gas or biogas have been directed toward electricity generation, and that includes federal tax credits and state renewable portfolio standards that require utilities to have a certain percentage of renewable energy,” Pabor explains. “A lot of these incentives are directed that way, and, for a period of time, electricity prices were fairly high.”

Without the incentives, the cost of converting the raw biogas to pipeline-quality natural gas would nearly match the selling price of natural gas, which would make the cleanup technology unattractive to project developers and investors, explains Pabor. “Now there are incentives for using renewable natural gas in your CNG vehicles. There’s the RFS that requires refineries to buy these renewable fuel credits from people who are producing renewable fuel. So we now, really for the first time, have an incentive for using landfill gas or biomethane as vehicle fuel because you can add that renewable fuel credit to the revenue.”

The CNG market could possibly see both challenges and opportunities in the upcoming years, depending on legislation and market demand from the Northeast. Conversion from electricity generation to CNG might be driven by the renewable fuel credit standards, Pabor says. “I think the expectation is, in some parts of the country, natural gas has seen some recent highs. I think the expectation for the next few years is not going to increase off its averages dramatically and so you do need the incentives for CNG. I think being able to predict what the renewable fuel credits will be within the next few years will draw someone into a CNG project.”

There are lots of opportunities with the organics diversion legislation coming out in states within the next five to 10 years, Davies adds. “Many states are going to zero-organics in landfills, which has been ramping up digester demand and giving us a lot of opportunity with municipalities and others in the private sector.”

Author: Chris Hanson
Staff Writer, Biomass Magazine
[email protected]