Renewable natural gas land grab ends as suppliers turn to sales
By David French
HOUSTON, March 9 (Reuters) -The land grab for the best sites to gather renewable natural gas (RNG) from landfills and dairy farms is largely over, executives said this week at the CERAWeek energy conference, as developers turn to marketing the fuel for uses including in transportation and power generation.
RNG, methane derived from biological waste, is prized for its potential to replace natural gas and reduce climate-warming emissions otherwise released into the atmosphere.
BP Plc BP.L made a splash last year by spending $4.1 billion on RNG firm Archaea Energy. There also have been smaller deals as well as joint ventures kicked off by companies including Chevron Corp CVX.N, Republic Services Inc RSG.N and Clean Energy Fuels Corp CLNE.O.
Investors had paid up to secure the biggest sites in a move compared to the huge sums paid last decade for land in the most productive U.S. shale oil and gas fields, executives said.
"If you look back at the last five years in shale, with the race to secure the best acreage, and what people were willing to pay to do that, you've seen a lot of the same in RNG," Brian Hlavinka, a vice president at gas pipeline operator Williams Companies Inc WMB.N, said this week.
"What we've seen now is a calming of those waters," he said.
Having secured supplies, RNG backers are looking to tap new markets.
Scott Pearl, a principal at investment firm Global Infrastructure Partners (GIP), said RNG could be used in gas-fired power plants which are only turned on during periods of peak demand - known as "peaker plants" in the industry.
Steve Caldwell, a vice president at utility National Grid NG.L, said RNG can be added to natural gas used to heat homes to partially reduce the overall emissions produced.
RNG is now used as a fuel. Companies like landfill operator Waste Management WM.N and retailer Walmart Inc WMT.N use RNG for their trucks fleets.
However, supplies of RNG are limited and its price substantially higher than traditional natural gas, which was trading on Thursday around $2.60 a million British thermal units, about a third of what gas fetched last summer.
The RNG market contributes 180-200 million cubic feet per day, a fraction of this year's projected 100.34 billion cubic feet per day (bcfd) of natural gas from drilling, Williams' Hlavinka said.
The amount of RNG which can be integrated into the energy system is limited by the fact there are only so many farms and landfills, meaning it will never have enough scale to replace traditional natural gas.
"RNG's not going to solve decarbonization for natural gas," said GIP's Pearl, estimating the maximum potential supply at somewhere between 5 bcfd and 10 bcfd.
Reporting by David French in Houston
Editing by Marguerita Choy
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