Archaea Energy's Biogas, RNG Rollout

Archaea Energy is prioritizing RNG facilities at many of the U.S.’s 2,500 landfill sites.
By Amanda Wagner | January 26, 2022

Now more than ever, consumers are becoming increasingly aware of their impact on the planet. There is greater interest in alternative, renewable energy sources and a desire to do their part when it comes to energy consumption and reducing carbon footprints.

Biogas and renewable natural gas (RNG) are poised for continued substantial growth due to this ever-increasing push toward decarbonization, as well as its potential as a lucrative business endeavor. According to the American Biogas Council’s most recent tally, the biogas energy industry currently consists of roughly 273 on-farm systems, 1,269 wastewater systems, 66 food scrap systems and 645 landfill systems. While the number of landfill biogas facilities might seem fairly substantial, just 13% currently have RNG facilities.

As for consumer demand, natural gas accounted for 34% of energy consumption in the U.S. in 2020, with renewable energy at 12%, according to the U.S. EIA This further amplifies the potential in this space, with demand for natural gas already high and the renewable energy space primed for growth.
In this highly competitive industry, Archaea Energy recognizes the opportunity and aims to redefine the RNG sector.

From A to Energy
Derived from the Greek word archaios, meaning ancient or primitive, archaea are a domain of single-celled organisms that includes methanogens, which reduce carbon dioxide to methane during anaerobic digestion. But while the word means primitive, what Archaea Energy is doing extends far into the realm of innovation, and the company is positioned to become the largest producer of RNG in the U.S.

A 250-employee company based in Houston, Archaea went public through a special purpose acquisition company (SPAC) merger in September. Leadership includes Nick Stork, CEO, and Richard Walton, president. Stork and Walton embarked upon their RNG journey as landfill owners in Pittsburgh. After developing a RNG facility on their own landfill, they recognized the opportunity, cash flow, stability and predictability of the investment, with the added benefit of repurposing a byproduct that would otherwise negatively impact the environment.

 Now, Archaea Energy’s core focus is its commercial strategy of prioritizing the sale of RNG under long-term, fixed-price contracts to creditworthy partners. An example of one of the company’s recent deals was the mid-November signing of a 21-year purchase and sale agreement with Northwest Natural Gas Co. Under the contract, subsidiary NW Natural will purchase the environmental attributes generated by Archaea related to up to 1 million MMBtu of RNG annually from its portfolio of production facilities, for a fixed fee during the 21-year period.

In this highly competitive space, Archaea Energy is actively working to transform how new sites are developed and set itself apart from others in the industry. This is done in a number of ways, but the first is speed to build. Project Assai, a marquee project nearly five times the size of an average landfill, is located at the Keystone Sanitary Landfill in Dunmore, Pennsylvania, and is an example of a swift project turnaround. Assai has an inlet capacity of 22,500 standard cubic feet per minute and combines landfill gas flows from the Keystone Sanitary Landfill and the Waste Management Alliance Landfill. Assai will deliver over 4 million MMBtu of RNG annually at projected flows, methane recovery and uptime, with approximately 80% of the total RNG volumes contracted on a long-term, fixed-fee basis with FortisBC Energy Inc., Énergir, L.P., and The Regents of the University of California, for periods of up to 20 years.

Notably, Assai commenced operations in late December, approximately two years after project development began—cutting the industry-average timeline in half. Believed to be the world’s largest landfill gas to RNG plant, this is a one-of-a-kind opportunity to showcase expertise and differentiators in the industry, says Megan Light, vice president of investor relations at Archaea Energy. “When returns are high, competition increases,” shares Light. “The RNG space is fragmented with a few small developers. Expertise is the key to competing. It’s less about price and more about credibility and execution.”

Key to standing out in the industry is a unique operational approach, Light says. “One of the draws of landfill RNG facilities is the predictability. With significant in-house gas processing expertise, we are uniquely positioned. The ability to make small tweaks to the process has the potential for a big impact and more output. This is a differentiator in the marketplace and ensures the best possible outcomes over time.”

Archaea Energy’s in-house experience Light refers to includes unique knowledge of gas separation and nitrogen rejection, which is highly beneficial in both new construction, and repair and optimization of an existing RNG plant.

Another strategy decision for operational efficiency is a standard RNG project design, also known as the Archaea V1 design. “Standardizing project size and design decreases the overall risk, requires less reliance on vendors, allows for faster and more cost-effective plant construction, maximizes methane gas recovery across locations and builds flexibility into the process, both during the building phase and when operational,” Light says.

Finally, a commercial strategy that prioritizes selling RNG under long-term, fixed-price contracts to creditworthy partners provides predictability of cash flow, removes variability and decreases the emphasis on selling into the marketplace, which can be volatile (as energy demands increase, consumer costs rise, and inflation adds to an already complex situation). “This benefits customers who use natural gas within their existing infrastructure, such as utilities, corporations, universities and other commercial entities that want to prioritize decarbonization, replacing fossil fuels with RNG,” Light says. “Additionally, long-term contracts provide cash flow stability and funds reinvestment for more growth and innovation.”

On the Horizon
With a backlog of 35 projects, Archaea Energy is leveraging its technology and assets to grow and evolve. Focused on increasing the production and availability of RNG, a key benefit of the recent merger and going public is the funding that followed, according to Light. “Adequate funding further eliminates the risk and allows Archaea to focus on execution and following through on customer promises.” 

As for strategic priorities moving forward, Light says they are as follows:

Upgrades to existing facilities. “Archaea Energy currently has 11 operational facilities and seeks to get even more production from each,” she says. This includes everything from changing out equipment for greater efficiency to building a new plant to replace dated infrastructure.

Electric conversions, landfills with electric assets and building new RNG plants. “We see a lot of opportunity for sites with existing electric assets and transitioning the type of production,” Light says. “If a facility is not contracted to make electricity there is an opportunity to improve and grow by building an RNG plant on the site.”

Greenfield opportunities. A significant percentage of U.S. landfills don’t have electric or RNG facilities, and Archaea Energy is actively securing rights for new projects—approximately 40% of the 35 projects in play fall into this category, according to Light.

“As we look to grow, our first focus is development,” Light notes. “Currently, most developers average one to two projects a year, but we want to streamline processes and identify efficiencies to increase to 10, 15 or even 20 projects a year … this means significant investment in people, processes and supply chain to achieve a dramatically different scale than the industry is currently known for. The question is, how quickly can we ramp up?”

The future is brimming with potential, Light adds. Right now, a priority is negotiating for additional gas rights and adding production where there is no production capacity currently. “Greenfield projects and electric conversions are the current focus. Downstream, Archaea Energy could acquire electric assets for conversion to RNG facilities over time, but only if the price is attractive.”

With 11 RNG sites and 17 landfill gas-to-electricity sites, Archaea has the experience to significantly impact the RNG sector and its availability. Operational expertise facilitates strong partnerships with landfill owners and operators, establishing a strong foundation for growth and innovation in an industry that is full of potential and well-positioned for global impact.


Contact: Anna Simet
asimet@bbiinteriational.com
701-738-4961