BP-Owned Archaea Energy Deploys First Modular Landfill Gas-To-RNG Plant with Six-Fold RNG Production Increase Planned by 2030: And Some RNG Data and Forecasts

     BP’s Archaea Energy just announced the commissioning of its first modular landfill gas-to-renewable natural gas (RNG) plant. I like to keep track of modular energy developments since modularity often means efficiency and solutions that tend to work well. This new plant is in Medora, Indiana, adjacent to a landfill owned by waste management company Rumpke. Archaea’s proprietary Archaea Modular Design (AMD)—is equipped to capture and process 3,200 cu ft/min. of landfill biogas into RNG, according to BP. That equates to 4.6MMCF/day of capturing and processing power if operating at 100% for 24 hours, which is unlikely since downtime can be significant. Archaea’s design allows plants to be built on skids with interchangeable components. They plan to put several more of these modular plants online this year and increase their LNG production by more than six times by 2030. BPO purchased Archaea Energy in October 2022 for $4.1 billion. Below is an image from an Archaea investor presentation before BP’s purchase showing modular components.

 

 Source: Archaea Energy: Renewable Energy Redefined. Second Quarter 2022. Earnings Presentation. August 16, 2022. 2022.08.16+Archaea+Energy+2Q+Earnings+Investor+Presentation+vF.pdf (d1io3yog0oux5.cloudfront.net)

     RNG is processed biogas. Biogas can be processed to varying degrees and RNG is the most processed so that it becomes pipeline quality. It is much more expensive to produce and process than fossil natural gas due to impurities and difficulty of capture. Since it is captured from sources being generated into the atmosphere its capturing is considered to be mitigation of otherwise vented methane. As of the beginning of 2022 it was estimated by Wood MacKenzie that the U.S. was producing 212 MMCF/day of RNG. That amounts to just 0.2% of U.S. natural gas production. Since RNG is captured and considered to serve the function of mitigating a major greenhouse gas it commands premium prices. Those high prices are needed to make capturing and processing economical. Through the past few years to early 2022 RNG pricing averaged from $7 to $25 per MCF while fossil natural gas averaged from $2.50 to $3.50 per MCF. Thus, the premium above fossil gas probably averages about 3 to 6 times it. Estimates are that RNG production will increase by 10 times by 2040, but even then, it probably won’t make up much more than 1-1.5% total U.S. natural gas production, although some estimates are as high as 3%. It is desirable as a means of carbon offsetting so companies will continue to purchase it at premiums for this purpose. State mandates are also a factor. The EPA periodically sets values for RINs, renewable energy credits which are traded. Thus, the economics of RNG fluctuate in a number of ways. Different sources of RNG have different carbon intensities but also differing costs to produce. For example, RNG made from manure has very low carbon intensity, much lower than RNG from landfill gas, but is much more costly to produce.  

    

Source: Natural Gas Intelligence.

     As the following graphs show, landfill gas makes up the vast majority of feedstocks for RNG and that will likely continue to be the case going forward. Other sources include agriculture & livestock, food waste, and wastewater at treatment plants. Landfills are a major source of vented methane, producing about 17% of methane emissions according to the EPA. This may be a significant underestimation according to some sources. Landfills also emit significant amounts of CO2. Landfill gas is often roughly 50% methane and 40-50% CO2, with small amounts of other gases, some of them toxic. The high CO2 content makes it attractive for CCS since the CO2 is already captured and separated. All that is left is to transport it and sequester it. Archaea is interested in this as well as using RNG as a feedstock for blue hydrogen where the CO2 from pre-combusted RNG during steam reforming would be captured and sequestered as well.  

Source: Boston Consulting Group

Source: Seeking Alpha

 

Source: Boston Consulting Group

References:

bp’s Archaea Energy starts up novel renewable gas plant in Indiana. Robert Brelsford. Oil & Gas Journal. October 4, 2023. bp’s Archaea Energy starts up novel renewable gas plant in Indiana | Oil & Gas Journal (ogj.com)

US RNG approaches maturity as lenders eye 50% production growth by 2024. Dylan Chase. Ed. Richard Rubin. S&P Global. January 6, 2023. US RNG approaches maturity as lenders eye 50% production growth by 2024 | S&P Global Commodity Insights (spglobal.com)

Renewable Natural Gas: Attracting Significant Capital, Seeking Alpha. October 4, 2022. Renewable Natural Gas: Attracting Significant Capital | Seeking Alpha

Analysis Shows Rapid Growth In US RNG Production. Energy Vision. Biomass Magazine. March 6, 2022. Analysis shows rapid growth in US RNG production | Biomass Magazine

Is Renewable Natural Gas Poised for Future Growth or Doomed to Decline? Ilshat Haris, Laura Borland, Anusha Paliwal, and Gonzalo Caballeri. Boston Consulting Group. June 2023. us-rng-article-v16.pdf (bcg.com)

Archaea Energy to be Acquired by bp for Approximately $4.1 Billion. Archaea Energy. October 17, 2022. Archaea Energy to be Acquired by bp for Approximately $4.1 Billion :: Archaea Energy Inc. (LFG)

Archaea Energy: Renewable Energy Redefined. Second Quarter 2022. Earnings Presentation. August 16, 2022. 2022.08.16+Archaea+Energy+2Q+Earnings+Investor+Presentation+vF.pdf (d1io3yog0oux5.cloudfront.net)

Natural Gas and Decarbonization: Key Component and Enabler of the Lower Carbon, Reasonable Cost Energy Systems of the Future: Strategies for the 2020s and Beyond. Kent C. Stewart. March 2022, Amazon Publishing.

U.S. RNG Production Growing ‘Dramatically,’ but Nationwide, Future Still Uncertain. Morgan Evans. Natural Gas Intelligence. May 18, 2023.  1 Message! (naturalgasintel.com)