U.S. RNG Takes Off with Virginia Natural Gas Pilot, GreenGas ... - Natural Gas Intelligence

U.S. RNG Takes Off with Virginia Natural Gas Pilot, GreenGas Acquisition - Natural Gas Intelligence
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U.S. RNG Takes Off with Virginia Natural Gas Pilot, GreenGas Acquisition

Virginia Natural Gas Inc. (VNG) is prepared to test the flow of renewable natural gas (RNG) in its distribution system after the Virginia State Corporation Commission (VSCC) granted its first-ever tariff that allows for such a pilot program.

The local distribution company (LDC) is on its way to further integrating RNG into its system as part of parent company Southern Company Gas efforts to achieve net-zero direct greenhouse gas (GHG) emissions from operations by 2050.

“The approval of this pilot program is a significant step as we move forward to develop sustainable, environmentally responsible solutions while helping our state lead in the progress toward a clean energy future,” said VNG President Robert Duvall.

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As part of the approval, VNG would be able to interconnect RNG production facilities with its existing natural gas pipeline distribution system. The LDC also noted the five-year RNG Interconnect pilot program would “encourage the development of RNG production facilities within the VNG service territory.”

Executives from RNG production to midstream transportation and utility applications recently discussed the potential scalability of RNG. The main hurdles standing in the way of a mass adoption of the fuel are short supply and obscurity in a long-term market value of the fuel.

Current estimates pin production levels at about 180-200 MMcf/d, far below the estimated 100 Bcf/d of U.S. natural gas consumption. Additionally, market players believe a forward price curve or a more mature commodity market trading system would enable RNG players to hedge for production, costs and sales, enabling a faster pace of growth.

The VSCC approval granted VNG to invest up to $2 million per RNG interconnection project, a combined total of up to $4 million/year, and up to $20 million over the five-year pilot.

The investments would fund not only the RNG Interconnect pilot program, but also “promote sustainable natural gas development and production throughout the Commonwealth of Virginia,” via VNG’s Sustainable Gas Program.

“Through the Sustainable Gas Program, VNG has the ability to purchase both the physical molecule and environmental attributes with a cap on the associated cost premium,” spokesperson Rick DelaHaya told NGI.

RNG purchases would not come in the form of differentiated sales to individual customers, but would be part of the overall system supply “for the benefit of all VNG customers,” DelaHaya added.

A 2021 study from ICF Research LLC commissioned by Southern Co. Gas demonstrated that RNG and methane produced from hydrogen, aka power to gas, could supply a little more than 20,000 MMcf/y of VNG’s gas deliveries by 2050 under a high utilization scenario. The high utilization deployment scenario assumes about 56% of potential RNG feedstock is available, and does not represent the maximum RNG achievability.

Based on ICF estimates, VNG could require just under 60,000 MMcf/y of natural gas supply to meet customer demands.

DelaHaya noted that the ICF analyses “determined that the pathway incorporating natural gas efficiency technologies and RNG is lower cost and” could lead to more GHG emissions reductions for residential and commercial customers “than the mandatory 100% electrification pathway.”

Headquartered in Virginia Beach, VNG serves more than 300,000 customers across 5,500 miles of natural gas pipeline across southern Virginia.

Funds Pouring In

Meanwhile, more growth in the RNG sector came earlier this week as Australian investment company IFM Investors acquired a stake in Charleston, SC-based RNG producer GreenGasUSA.

GreenGas owns and operates assets across the RNG value chain, from waste streams to RNG transportation and pipeline injection. The company boasts several commercial and industrial customers and long-term partnerships, including a 10-year RNG offtake agreement with Enviva Partners LP and a 20-year RNG purchase agreement with Duke University.

IFM’s acquisition of a majority interest in GreenGas through its Net Zero Infrastructure Fund (NZIF), established in 2022 to fund infrastructure assets that would accelerate the net zero transition, provides long-term investment resources for GreenGas to expand its RNG project footprint.

“Our mission remains the same – to help farmers, food processors and industrial manufacturers capture greenhouse emissions. Our new owners help accelerate this as we build out the platform,” said GreenGas CEO Marc Fetten.

GreenGas represents NZIF’s first investment in the low carbon fuels sector.

IFM’s global head of Infrastructure Kyle Mangini said the company’s “investment in GreenGas will help IFM deliver on its purpose to protect and grow the long-term retirement savings of working people.”

Headquartered in Melbourne, IFM holds and manages long-term retirement savings of about $143 billion in assets under management. IFM is a signatory on the United Nations-backed Principles for Responsible Investment, and focuses on environmental, social and governance issues in its investment strategy.

RNG Facility Crops Up

That’s not all the news in the RNG industry. BioTown Biogas is bringing online its latest digester and processing facility in Reynolds, IN.

The facility is expected to generate not only more than three million gallons/year of RNG, but also more than 42 million kWh/year of renewable electric power. According to BioTown, the facility is among the largest on-farm biodigesters in the world.

The facility is the result of BioTown’s partnership with Green Rock Energy Partners LLC, a private equity firm that focuses investments in renewable energy companies and projects.

“A major community and industry milestone like this does not happen overnight. BioTown Ag and Green Rock Energy Partners put in years of work to lay the foundation and to prepare for a lower carbon future in farming that, at first, probably sounded like a pipe dream,” said Chad Hoerr, general manager of BioTown Biogas.

Northern Indiana Public Service Co. holds an offtake agreement for the renewable electricity supplied by the facility, and United Energy Trading and others are expected to be supplied by BioTown’s RNG.

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