Sees higher demand as more states embrace low carbon fuel standard programs. Expects positive impact from higher cellulosic RVO in 2022 RFS
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Clean Energy Fuels has signed a deal with one of the largest US dairy farmers to provide an additional 5 million gallons of low carbon renewable natural gas as it seeks to expand its RNG fueling network, the company said in a Jan. 26 statement.

Under the agreement, Clean Energy Fuels will build a methane capture digester at Millenkamp Dairy, located in Jerome, Idaho, to produce the renewable natural gas which will then be shipped to California.

“The project is expected to provide an anticipated 5 million gallons of very low carbon-intensity RNG annually, which will flow into Clean Energy’s fuel network. The Millenkamp project will be developed through Clean Energy’s joint venture with bp,” the statement said.

Clean Energy has worked closely with bp since 2017, and also has relationships with Chevron and TotalEnergies for similar projects involving dairy farm methane.

“Bp brought that one to us as part of the joint venture,” said Will Flanagan, vice president of RNG investment, speaking on the Clean Energy’s 2022 RNG day virtual presentation Jan. 26 about the Millenkamp project.

Under its agreements with bp, which also includes RNG output from dairy farms in South Dakota and Iowa, bp transports the RNG to California markets and then gets the federal credits as well as California’s Low Carbon Fuel Standard credits.

Clean Energy then distributes the RNG through an extensive network of over 550 stations, the largest RNG fuel distribution network in the US. It also has offtake agreements to supply fleets with RNG including those owned by Amazon, UPS, the Los Angeles Metro, and New York City Transit as they look to decarbonize their trucking and transportation systems.

“Amazon wants 100% RNG as does UPS for the vehicles we fuel. And there isn’t a better carbon negative intensity fuel than RNG,” said CEO Andrew Littlefair on the virtual presentation.

‘Not just a California story’

Clean Energy expects total 2022 RNG sales to average 194 million GGEs, or gasoline gallon equivalents, with all volumes coming from third party supply contracts.

By 2026, the company expects RNG sales to average 474 million GGEs, with about 104 million GGEs of that coming from its own dairy-produced RNG.

Currently, California is the destination for RNG and other renewables, drawn by the state’s LCFS credits.

Existing RNG demand in California currently is over 125 million gallons, with about 90% supplied by landfill gas and dairy farms.

Under the state’s LCFS, which puts a premium on lower carbon intensity fuels, dairy RNG is worth $13/gal compared with landfill RNG which is worth about $4.20/gal, increasing the appeal of dairy RNG.

However, Clean Fuels expects demand for RNG to grow outside of its current footprint.

“It’s not just a California story,” said CEO Andrew Littlefair.

“Many states are looking to…replicate what California has done with the low carbon fuel standard… Look no further than New York. The state of New York is very close to adopting … something very similar to the low carbon fuel standard,” he added.

Besides state incentives, federal tax credits for RNG include the $1/gal blender tax credits as well as D3 RINs — renewable energy credits granted under the Environmental Protection Agency’s Renewable Fuel Standard.

The price of D3 RINs has risen in line with higher volume mandates for cellulosic biofuel, with Q4 values averaging $3.37/RIN compared with the $1.78/RIN in Q4 2020, according to Platts assessments.

Under the latest RFS mandate, released Dec. 7. 2021, 2022 mandated volumes of cellulosic biofuels are 770 million gallons, up 24% from the 620 million gallons mandated in 2021.

“The EPA … has come up with what we would consider to be very constructive in the renewable fuel standard program. The new RVO [renewable volume obligation] for obligated parties going forward …is constructive for a robust RNG program,” Littlefair said.

Pioneering females are disproving the old-fashioned view that dairy is an industry for men. Meet the dairywomen reshaping the narrative.

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