Ameresco Inc. is a leading clean-tech integrator and renewable energy asset developer, owner and operator. Its comprehensive portfolio includes energy efficiency, infrastructure upgrades, asset sustainability and renewable energy solutions delivered to clients throughout North America and Europe.
In the conversation on fueling America’s future, green hydrogen is showing vast potential. The fuel is created either by using renewable electricity via electrolysis to split ordinary water into hydrogen and oxygen or by converting biogas methane via steammethane reformation.
How significant is green hydrogen? In November 2022, Bloomberg New Energy Finance predicted, “A boom in the supply of and demand for the environment-friendly gas will power a whopping 120-fold global expansion in the key equipment used to split water and produce hydrogen. Installations of electrolyzers are set to grow from 2 gigawatts currently to 242 gigawatts over the next eight years,” with an anticipated $130 billion being spent on electrolyzers by 2030. “Clean hydrogen has a critical role to play in a net-zero emissions world, providing a solution for hard-to-decarbonize sectors such as steel [production], chemical manufacturing, and heavy-duty transport. It is expected to become increasingly cost competitive as deployments rise.”
Green hydrogen clearly holds promise for the future. But both options for creating it are relatively expensive and energy intensive. They also require infrastructure and end-use capacity that currently are underdeveloped and will take time to become widely accessible.
As we continue to look at green hydrogen, a continued investment into renewable natural gas will effectively create a readily available bridge to large-scale availability of green hydrogen. RNG is already here and immediately available, requires no significant infrastructure modifications and is economical in offsetting carbon emissions. And even when the hydrogen network is built out, the combination of both RNG and green hydrogen will have significant capacity to offset global carbon emissions.
The proof is already here. Numerous biogas-to-beneficial-use projects across the United States utilize otherwise waste gases from landfills, wastewater treatment plants, agricultural digesters and other sources to produce an RNG indistinguishable from common natural gas. For example, Ameresco owns and operates 37 biogas utilization projects across the U.S. and generates approximately 3.4 million MMBtu of RNG from five RNG projects. Approximately 20 more projects in various stages of design, permitting and construction are expected to triple Ameresco’s RNG production.
However, developing these projects is not for the faint of heart. Despite the fact that there is a wave of new investment and newcomers to the industry, these are complex projects that can be difficult to build and operate effectively. Installation costs can easily exceed $100 million, and failing to have the right knowledge and resources to construct and operate a project will result in an inability to meet gas pipeline specifications, leading to financial failure of the project.
Additional complexities include the variability of the quality and quantity of raw biogas, as well as the volatility of the RNG pricing, which is market driven by supply and demand in the vehicle fuel market as well as in the developing voluntary carbon reduction market.
Perhaps because of the complexities, these projects lend themselves well to partnerships. When like-minded and motivated entities—both public and private—work together, it can be beneficial for everyone involved, including the community being served. Ideally, on-site operations and maintenance staff essentially become extensions of the owner’s staff, with all parties working to maximize economic benefits and renewable-energy goals. Also, it is vital to establish and maintain close relationships with suppliers, equipment vendors, contractors, manufacturers, as well as the parties and markets buying the RNG.
The actual cost of a new RNG facility will depend on the size of the facility and how much infrastructure may already be in place. “The average RNG cleaning and conditioning facility costs $17 million to construct, with actual facility construction ranging from under $1 million to over $100 million,” according to data developed by the RNG Coalition. “Many of these facilities are financed with private equity, while others capitalize on loan programs, such as the USDA Business & Industry Loan Program."
Investing in RNG requires moving beyond the initial sticker shock. We must consider the long-term benefits relative to the cost. For companies, universities and governments committed to decarbonization, RNG can be cost-competitive with other popular strategies for reducing the carbon footprint of energy consumption.
For example, Ameresco recently conducted a study for a health care client whose goal was to reduce its Scope 1 emissions. Its facility consumed approximately 715,000 MMBtu of natural gas in its boilers with carbon emissions of approximately 2,750 metric tons of carbon dioxide per year. The estimated minimum capital cost of converting its natural gas boilers to electric boilers was $14.9 million, including significant utility and power infrastructure upgrades. Plus, it was determined that electrification would increase its Scope 2 emissions by 2.3 times. From an energy costs perspective, electrification increased their energy costs by $61.5 million over 20 years, compared to fuel switching to RNG, which would increase their energy costs by $34 million (RNG at $30/MMBtu). Plus, converting to RNG would result in an overall reduction (not offsetting) of all carbon emissions by 40% as compared to electrification, which would increase total carbon emissions by 2%. This study proved that RNG has a valuable and economic role in decarbonization, and that electrification is not as simple or as affordable as many believe.
“If done well and sold on a large scale, RNG is an affordable source of clean energy for consumers,” the RNG Coalition concluded. RNG will cost “much less than rebuilding infrastructure for electrification, given the technology and infrastructure currently available.”
RNG provides a cost-effective and environmentally sound source of energy for today and tomorrow. With the ambitious decarbonization goals now in place, we as an industry need to utilize all of the tools available—including RNG—to scale quickly enough to achieve these new benchmarks and help mitigate climate change.
SOURCES
Bloomberg New Energy Finance, Nov. 14, 2022: about.bnef.com/blog/a-breakneck-growth-pivot-nears-for-green-hydrogen
RNG Coalition: www.rngcoalition.com/rng-qa