Navigant Research Blog

Biogas and the Natural Gas Bonanza

— May 17, 2012

It is the odorless and invisible 500-pound gorilla in the room.  Currently hailed as the antidote to U.S. energy insecurity and a bridge fuel for the 21st century, natural gas is every bit as fossil as its coal and petroleum cousins.  But for clean energy, which is coming off a stimulus-fueled high and $100-dollar-plus oil run, could it be a death knell?  My colleague Kerry-Ann Adamson has looked at this question from the point of view of Smart Energy overall.  In my world of bioenergy, the accelerating development and availability of biogas, a renewable form of natural gas, indicates that natural gas surge could actually hasten the transition to clean energy, not impede it.

In 2009, the U.S. passed Russia to become the world’s largest producer of natural gas.  Estimates suggest that at 2010 consumption rates, the U.S. has enough recoverable natural gas resources to supply over a century of use.  Meanwhile, the Nymex price has dipped below $3 per million British thermal units (MMBtu), down from nearly $14 four years ago.  The glut has analysts in the U.S. scrambling to recalibrate energy forecasts and renewable energy project developers searching for new off-take partners to make project economics pencil out.

The boom in shale gas has stripped renewable energy of two of its key arguments: that a heavy reliance on fossil fuels is 1) contributing to irreversible climate weirdness; and, since these fossil fuels tend to come from nefarious nations, 2) making the United States increasingly energy insecure.  With respect to mitigating climate change, studies point to natural gas being less carbon intensive than coal and potentially oil as well.  As for energy security, the sudden bounty of domestic carbon is fuelling what could be a huge shift in U.S. transportation fuel, away from petroleum-based fuels to compressed and liquid natural gas, and potentially hydrogen and fuel cells, longer term.

Crossing the Biogas Bridge

Many believe the natural gas bonanza may be a transition fuel for the larger clean energy transformation.  John Podesta, former chief of staff to ex-President Bill Clinton and now head of the Center for American Progress in Washington writes that natural gas can serve “as a bridge fuel to a 21st-century energy economy that relies on efficiency, renewable sources, and low-carbon fossil fuels.”

No renewable is in a better position to cross this bridge first than biogas.  Vastly underutilized, biogas is essentially natural gas that is produced in a matter of millions of seconds rather than millions of years.  The result of anaerobic digestion – a naturally occurring process in which bacteria feed on organic matter in the absence of oxygen – biogas is commercially produced in anaerobic digesters (AD) and landfill gas recovery facilities designed to treat biowastes such as manure, sewage, energy crops, and organic matter.  Currently, in the U.S., the economics for generating electricity from biogas are dismal.  But with emerging technologies, raw biogas can be stripped of carbon dioxide and other trace gases, bringing it up to the quality level of natural gas.

This renewable natural gas, essentially purified methane, is virtually identical to natural gas, but without the fracking.  It’s a fully fungible alternative, avoiding many of the blending constraints you see with an alternative like ethanol.  Leveraging natural gas infrastructure, it can be distributed as CNG, LNG, or in pipelines via gas-to-grid injection.  Although upgrading biogas to pipeline quality results in a fuel considerably more expensive than natural gas, biomethaneis starting to gain momentum in the U.S., particularly as a potential renewable fuel that can satisfy advanced biofuels mandates under the Renewable Fuel Standard (RFS2) and emerging Low Carbon Fuel Standards (LCFS).

The challenge for the biogas industry will be scaling up in economical ways.  As Pike Research’s analysis in our upcoming biogas report shows, one model that can reduce costs and concentrate supply is the development of community biogas hubs.  Using gathering infrastructure that is shared across several smaller-scale biogas producers linked via a pipeline network to an upgrading facility, upgrading costs can be defrayed among all producers.

Longer term, by leveraging shale gas infrastructure, biogas is poised to capitalize on a free ride to widespread scale up, a notion unheard of in many clean energy technology circles.  Should a massive natural gas infrastructure build-out take place to move shale resources to market, with significant untapped feedstock potential, biogas could emerge as a clean energy Cinderella story over the next decade.


Natural Gas – Boon or Bane for Smart Energy?

— May 16, 2012

The first Pike Research Smart Energy Annual Report is due out soon (Q2 of 2012), and in it Pike Research calculates the size and value of the global smart energy market in 2011.  We define smart energy as “the range of efficient technological options available to providing electricity in a distributed fashion, either for local use or for grid support,” covering renewable energy, biopower, energy storage and advanced conversion technologies such as fuel cells and CHP technology.  But we don’t cover developments in the natural gas market.  Why? Because it remains unclear whether the developing natural gas market in the US will harm or help the smart energy market.

Daniel Yergin in his article for CNN is cautiously optimistic that in the US natural gas will not crowd out the developing renewable energy market, but will more likely replace and then displace coal and nuclear for power production.  In Europe I believe that governments are starting to move away from the dash-to-gas due to the increased geopolitical tensions caused by the location of most of natural gas reserves.  In Austria, for example, the region of Güssing has a policy of 100% renewable, locally produced, power.  As I covered in the past in an article for Fierce Energy, this includes 50 MWs of distributed fuel cell power using locally produced biogas.  The United Kingdom has taken a slightly different approach, and has to date limited the use of hydraulic fracturing, or “fracking,” due to the increased incidences of minor earthquakes in the vicinity of a nuclear waste storage facility.

But how will the surge in natural gas supplies affect the overall smart energy paradigm – the production, storage and use of efficient, distributed power?  From my own personal perspective it’s likely to be a good thing.  Over three quarters of all fuel cell systems deployed today use either natural gas or a form of fuel in which natural gas is the main component.  The addition of natural gas-powered fuel cells will in some cases help a renewable installation in the same grid system win contracts, as it can guarantee steady, predictable baseload power.  A win-win surely and a prefect example of the systems based approach that we see rapidly developing in the smart energy market.

One scenario we could see developing is utilities providing smart energy systems, rather than electrons and heat, where a package that combines a natural gas-fuelled fuel cell, solar and wind capacity, and an advanced battery for hydrogen-based storage are deployed together in a turn-key system.  This could be everything from 1-5-kilowatt (kW) systems for homes right up to 50-100 megawatts for communities or towns.  Joining the dots in this way will increase the overall efficiency of the power and heat production network, and emissions will decrease.  So, note to self: Next year in the 2013 Smart Energy Annual Report – include natural gas.


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