The podcast discusses the growing demand for Renewable Natural Gas (RNG) as a lower-carbon alternative to fossil natural gas. It explores the pricing and future growth of RNG, including the challenges of selling landfill gas RNG in the California market. The podcast also highlights the potential of RNG in various sectors, the interest from major oil and gas companies, and its role in achieving decarbonization goals.
Renewable natural gas (RNG) has seen significant growth in the US, with over 300 operating facilities and various use cases including transportation fuel and electricity generation.
Financial incentives like state-level programs and the federal Renewable Fuel Standard (RFS) have played a crucial role in boosting the RNG market in the US and driving increased credit generation.
Deep dives
The Growing Market for Renewable Natural Gas in the US
The podcast discusses the increasing demand and value of renewable natural gas (RNG) in the US. RNG is bio gas captured from sources like landfills, livestock manure, and wastewater treatment facilities, refined, and upgraded to meet natural gas pipeline specifications. The RNG market in the US has experienced significant growth in the past decade, with over 300 operating facilities and additional 450+ under construction or in development. RNG has various use cases, including as a transportation fuel for natural gas vehicles, where it already accounts for nearly 70% of on-road fuel use. It is also used for electricity generation on-site and as a feedstock for manufacturing bioproducts like green methanol and bio-hydrogen.
Financial Incentives Driving RNG in the Transport Sector
The podcast highlights various financial incentives that have boosted the RNG market in the US, particularly in the transport sector. State-level programs like the California Low Carbon Fuel Standard (LCFS) and Oregon's clean fuel program offer incentives for RNG as a transportation fuel, allowing its credits to be monetized. The LCFS, in particular, has seen significant growth in credits generated from RNG, thanks to its negative carbon intensity. The federal Renewable Fuel Standard (RFS) also plays a key role, with RNG generating renewable identification numbers (RINs) when used as a transportation fuel. The EPA's recent rule for 2023-2025 projects a substantial increase in RNG volumes and potential credit generation.
Pricing Structure and Market Outlook for RNG
The podcast explores the pricing dynamics and future prospects of RNG. Pricing for RNG heavily depends on the market it's sold into, such as the transport or voluntary space, feedstock type, and the term length of the deal. For transport fuels, RNG can fetch high prices of $30 to $38 per MMBTU, driven by the stacked value of RINs and LCFS credits. In the voluntary market, landfill gas pricing for shorter-term deals ranges from $20 to $30 per MMBTU, while longer-term deals sell lower at $15 to $18 per MMBTU. Livestock manure RNG commands a premium price due to its significantly lower and negative carbon intensity. The market for RNG is expected to continue growing, driven by government net zero targets, utility demand, and the increasing interest of major oil and gas companies through acquisitions.
Renewable Natural Gas – also known as RNG or biomethane — has gained attention in recent years as a lower-carbon replacement for conventional fossil natural gas. Rising demand for RNG has helped push prices for the associated environmental attributes up to anywhere from five to forty times the price of physical natural gas. As the market has grown, so has the need for transparent pricing. In response, S&P Global Commodity Insights launched first-of-kind pricing for landfill gas RNG for the California and outside-of-California markets in May.
What supports those premiums for RNG and how does S&P Global see demand for this low-carbon gas alternative developing in the future? Kelsey Hallahan, team lead for low carbon commodities, discusses with low carbon pricing analyst Hope Raymond, senior biofuels analyst Jamie Dorner, and senior director for the S&P Global Hydrogen and Renewable Gas Forum Alex Klaessig.
Prices in this episode: North America Renewable Natural Gas Premium (California) - AEWAA00 EU Biomass Guarantees of Origin (GO) Current Yr Eur/MWh -- EBGY200 Low Carbon Fuel Standard Carbon Credits Front Quarter -- AAXYA00
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