In the dairy industry, renewable natural gas (RNG) has become a common term over the last three years. Similar terms include biogas and biomethane. While dairy manure is an ideal candidate for RNG production, other sources include swine manure, poultry litter, landfills, wastewater treatment plants and food recycling facilities.

Rohloff ty
Ty Rohloff
VP of Food and Agribusiness / Compeer Financial

In its most basic form, RNG is mainly composed of methane gas, carbon dioxide and trace elements. The methane component garners significant attention because studies have shown it is 28 times more potent than carbon dioxide in trapping heat in the atmosphere.

With a problem comes an opportunity. As it relates to animal agriculture, this is not a new concept. Europe has been collecting and digesting manure for at least 20 years. Additionally, European practices include using crop residues and food wastes, which can be a complement to the bugs and a good source of energy. The U.S. has also been processing manure for some time, capturing gas to run generators that produce electricity for operations or the electrical grid. Incentives often made these projects lucrative. Power utilities saw the chance to supply a portion of their power with renewable energy, typically through power purchase agreements lasting 10 years or less. As many of these contracts have expired, current pricing often doesn’t cover operational costs. With more efficient solar and wind production, utilities find it less economical to pay above-market rates for renewable electricity. The rise of biogas in agriculture was timely.

Revenue opportunities

Regarding the economic feasibility of existing and new projects, several revenue avenues exist. One of the more familiar sources is the California Air Resource Board (CARB) and the Low Carbon Fuel Standard (LCFS). CARB has authority over the LCFS and how it accepts different renewable transportation fuels. In looking at the timeline, changes made in the late 2010s were the catalyst to move animal livestock RNG projects forward. The wave of projects, including those with some existing infrastructure and greenfield projects, began to take off.

In addition to LCFS credits, other attributes include the EPA’s renewable identification number (RIN) credits under the Renewable Fuel Standard (typically D3 RINs) and brown gas or raw gas prices. In addition, there are also other state LCFS programs including Oregon, Washington and, as of this year, New Mexico. Canada also has a program, and there is also a voluntary market outside the regulated markets. Typically, that could include foreign or domestic businesses with a mandate or other groups looking to utilize or offset their carbon emissions.