Biogas producers finding opportunity in advanced biofuel markets

By Katie Fletcher | October 15, 2014

The U.S. currently has more than 2,000 operational biogas facilities out of 13,000 potential sites. According to the USDA, U.S. EPA and U.S. DOE’s August 2014 biogas opportunities roadmap, with proper support, more than 11,000 additional biogas systems could be deployed in the U.S. by 2030.

“Now that we have the EPA approving more biogas pathways for the renewable fuel standard (RFS), certainly there is a lot more opportunity for people to get involved and actually make money,” said Todd Taylor, attorney and co-chair of the Clean Technology Group with Fedrikson and Byron.

During the 2014 National Advanced Biofuel Conference held in Minneapolis on Oct. 13-14, Taylor and other professionals in the biogas space reviewed the continued momentum and implications biogas producers are experiencing in advanced biofuel markets with the expansion of the new RFS pathway for biogas.

The implications expressed across the panel were concerned with renewable identification number (RIN) price volatility, compliance complexity, a limited forward market for RINs and some uncertainty surrounding EPA rules and regulations. 

Advanced biofuel D5 RINs are worth approximately 50 cents, D3 cellulosic biofuel RINs are not quite certain, but predicted to be close to D5, according to Christine McKiernan, vice president of development and technology with Bioferm Energy Systems. In terms of RINs, McKiernan said the long-term bankable prospects today are not quite there.

McKiernan established to the audience that all the feedstocks under the RFS biogas RIN can be treated with projects, and that these projects can provide a performance guarantee and a long-term warranty. She iterated that the energy could be made for transportation vehicles, whether through electric generation for an electric car or biogas upgrade for a CNG fueling station. McKiernan’s concern, however, was posed in the question, “What is the value of the energy being produced?”

“This is the big question,” McKiernan said.

Taylor’s presentation covered considerations to make when developing a project for biogas RIN credits. Although the basis for the development process, Taylor said, may seem simple, it is not. Taylor broke down the process into a few steps. After the biogas facility is built the gas is upgraded to pipeline quality where it is converted into compressed natural gas (CNG) and liquefied natural gas (LNG) before being sold to an end-user.

One project Taylor and his team are developing on the East coast involves a developer looking at doing biogas RINs. “One thing we’ve learned from speaking with the off-taker is the biogas needs to be in a very clear spec,” Taylor said. “If it’s off spec you lose the RINs.”

Other considerations, Taylor mentioned, with biogas RIN project planning include EPA and California Air Resources Board registration, the amount of volatility with RIN and biogas pricing, consideration of the investment tax credit for part of the facility, even if its just for your own load, and finally that feedstock is key to RIN value.

Casey Whelan, vice president strategic initiatives with the U.S. Energy Services Inc. referred to biogas as an advanced biofuel ready for primetime in his presentation. He explained that in order to monetize and generate RINs, after establishing the biogas source and transportation use, the project must be registered with the EPA matching the source and use. He emphasized the need to document every component of the process.

One project Whelan shared was a roughly 4,000 MMBtu of biogas landfill project in Ohio with refuse trucks at roughly 50 locations consuming CNG and LNG. Whelan said the transaction is registered with the EPA, and generates over 3 million D3 and D5 RINs, which all D5 RINs have been sold.

Quasar Energy Group is also generating RINs and is listed as an approved renewable fuel producer under the EPA’s RFS2 Program. Corey Allen of quasar shared work the company is doing in creating CNG fueling stations at anaerobic digesters (AD). The company has named their alternative motor vehicle fuel quasar natural gas or qng. “Quasar will continue to install fuel stations at our anaerobic digestion systems hoping to build the infrastructure necessary to reduce transportation costs,” Allen said.

Currently quasar has four CNG fueling stations sited at AD facilities where they are cleaning, compressing and selling the CNG.

Upgrading the gas to pipeline quality takes time and capital. Taylor shared what bankers are looking for if a project requires outside capital. According to Taylor, bankers are going to mainly care about, “Who is going to buy it?” “For how much?” and “What kind of feedstock will the system take in?” After looking at the offtake and feedstock, the banker will look at the project’s technology and financing. “Money will follow good projects,” Taylor said.

Feedstock is considered key in a successful project. Surya Pidaparti, vice president NBC Systems, Novus Energy LLC, discussed feedstock from biodiesel production. RNG from biodiesel residue qualifies for D3 and D5 RINs.  Pidaparti shared work with converting glycerol recovered from the biodiesel production process into biogas, which is then turned into RNG.