Mich. renewable gas study poised to shape state policy

A study on the potential to produce renewable natural gas in Michigan will soon reach state lawmakers, setting off a rush for more information among environmentalists and other stakeholders seeking to influence the final report.

The study, drafted by ICF Resources LLC, will inform policymaking as lawmakers consider what role renewable natural gas, or RNG, will play in the state's energy transition. Environmentalists have long been wary of RNG deployment, and they turned out for a final meeting hosted by the Michigan Public Service Commission on June 29 as a public comment period winds down.

State lawmakers directed the MPSC to conduct the study in the state's 2021 budget bill. It could be consequential to state gas utility operators like DTE Energy Co. and CMS Energy Corp. And as other states consider RNG policies, the Michigan proceedings may also offer a preview of debates that will take place across the U.S.

Production potential

Michigan has the theoretical potential to produce 313.4 MMBtu per year of RNG by 2050, without considering technical, economic and policy factors, ICF found. This baseline inventory also assumed the state would produce RNG from eight feedstocks, some of which rely on technology not proven at scale.

Factoring in the barriers and assuming lower feedstock utilization, Michigan could produce 148 MMBtu/y in a "feasible" scenario, ICF concluded. This figure fell further, to 57.2 MMBtu/y, in the ICF "achievable" scenario, which assumed much lower use of thermal gasification, which is the process of breaking down dry biomass at high heat. In this scenario, Michigan would produce most RNG through the much more established process of anaerobic digestion, which is widely used to process captured methane at farms, landfills and other sources into pipeline-quality gas.

In the achievable scenario, RNG production would be more concentrated near densely populated areas like Detroit, where landfills can yield large volumes of RNG at a relatively low cost. In the feasible scenario, rural parts of eastern and western Michigan would play a bigger role due to the availability of agricultural and forest products for use in thermal gasification.

Asked about ICF assumptions about thermal gasification's commercial feasibility, ICF Director for Transportation and Energy Philip Sheehy said the authors believe the technology will be available by 2030, but they did not introduce much thermal gasification into projections until 2035. He called this view conservative compared to other forecasts.

Other stakeholders requested more details on ICF's calculations. Samantha Williams, director of Natural Resources Defense Council's Midwest region climate and clean energy program, said it was urgent for MPSC staff to meet data requests to allow stakeholders to file final comments ahead of a July 20 deadline. MPSC must deliver the final report to state Senate and House committees by Sept. 30.

Benefits, costs

ICF estimated a wide range of RNG production costs — $9.92 to $70.86 per MMBtu — which do not reflect the value placed on the fuel's environmental attributes in current or future biofuel markets. Producers can lower the cost of RNG by claiming a credit that values a unit of the fuel's ability to reduce emissions.

RNG production could reduce Michigan's emissions by 3 million tonnes of CO2 equivalent greenhouse gas emissions per year by 2050 in the achievable scenario, or 7.9 MMt in the feasible scenario, ICF forecast. This would equal an 8%-22% reduction in state emissions.

ICF projected that the cost of RNG would rise as developers initially prioritize lower-cost supplies and gradually move into higher-cost resources. It also did not assume RNG production costs will fall substantially. "There is no literature or credible research to demonstrate that in 2050 renewable natural gas can halve its production costs, or it can reduce its production costs by 30% or 50%," Sheehy said.

Questioned about the cost of marginal supplies, Sheehy said in-state supplies would have to compete with imported RNG.

On defining environmental attributes — a frequent topic of debate in the environmental community — Sheehy said Michigan lawmakers would have to decide how to value the climate benefit of RNG.

Comparison to other pathways

The report set the abatement cost — the cost of emissions reductions — for RNG at $130-$400 per tonne of CO2 equivalent emissions, based on an RNG price of $10-$25/MMBtu. The reference point is the three-year average benchmark natural gas price of $3.11/MMBtu. If today's high gas prices persist, abatement costs would decrease.

The ICF cost comparison of RNG to other emissions abatement opportunities also attracted scrutiny. Stakeholders raised concerns about the interpretations that readers could draw from ICF cost calculations for alternative pathways.

ICF ascribed the widest range of potential abatement costs to building electrification: $0-$1,000/tonne CO2e. Sheehy noted that the range is "dependent on a variety of scenarios and assumptions that we are drawing from other studies."

Sheehy said the takeaway should not be that RNG is a better option than the alternatives, which also include renewable hydrogen blending, renewable and nuclear electricity generation and transportation electrification. Instead, the report only found that RNG is cost-competitive with these pathways.

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