Comprehensive low-carbon fuel adoption vital to energy transition, IGU says

The International Gas Union is advocating for the adoption of all available forms of renewable gas in markets globally to help ease the pains of the energy transition. In its inaugural Global Renewable and Low Carbon Gas Survey Report released Nov. 10, the group said the shift would require strong and clear policy support from governments globally.

Seeing low-carbon and renewable gases as vital to decarbonization efforts, the IGU's new market survey report tracks development of biogas, biomethane, low-carbon hydrogen and other fuels globally.

"There is limited transparency as regards volume and pricing when compared to other energy commodities," IGU president Joe Kang said in the report. "Developing effective growth strategies, requires an understanding of the baseline, and that is what we aim to establish with this series."

Fundamentally, the survey report concludes that scalability is currently the biggest challenge for all low-carbon gases making rapid adoption of all available fuel types critical for the energy transition.

Currently, total global production of biogas and biomethane provides the equivalent of 400 TWh of energy supply – equal to just 1% of total global natural gas production, according to the report. Further, over half of that production is concentrated in Europe alone, with another 25% located in China.

Global low-carbon hydrogen production, meanwhile, accounts for just 0.03% of worldwide natural gas production. Despite growing emphasis on the importance of hydrogen in the energy transition, the IGU believes that much stronger policy support will be required to stimulates the market's future growth.

In the near-term, blue hydrogen and biomethane were touted as the most viable solutions to cost and scalability challenges given their wide availability and commercial readiness for rapid adoption.

US RNG market

Currently, there are about 300 renewable natural gas projects in operation or under construction in the US, according to Portland, Oregon-based gas distributor Northwest Natural Holding Co.

Given the high cost of RNG in the US market, much of the gas is currently used as a transportation fuel. In California, RNG use in the transportation sector has grown by over 175% in the past five years, with an estimated 92% of natural gas-powered trucks in California using the fuel as of last year, data from Natural Gas Vehicles for America shows.

Getting RNG supply to traditional residential-commercial customers has been an uphill battle for utilities in the US since few states offer a regulatory pathway to recover costs for the pricier low-carbon gas.

Earlier this year, Minnesota became one of just a handful of US states to approve legislation allowing utilities like CenterPoint Energy to pass on the cost of RNG or green hydrogen to the state's gas customers.

Regardless of the existing regulatory hurdles, US natural gas distributors, producers and utilities alike have stepped up their efforts recently to grow their footprint in the RNG market – an effort that's becoming increasingly attractive to investors.

On recent third-quarter earnings calls, Chesapeake Energy, DTE Energy Co., AltaGas Inc., One Gas Inc. and Dominion Energy updated investors on their continuing efforts to integrate RNG into their respective downstream delivery businesses. Several of the companies also highlighted emerging opportunities in the RNG business that could come with proposed tax credits in the $1.75 trillion Build Back Better Act – an controversial legislative package that is currently pending congressional approval in both the US House of Representatives and the US Senate.