Gas-Rich Pennsylvania Primed for Biomethane

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Suggesting demand is on the rise, gas distributor UGI Corporation (NYSE:UGI) (King of Prussia, Pennsylvania) said it formed a new joint venture with a BP (NYSE:BP) (London, England) subsidiary to develop renewable natural gas in Pennsylvania.

UGI and Archaea Energy (Houston, Texas), which BP bought last year, formed a joint venture called Aurum Renewables that will develop biomethane, known also as renewable natural gas (RNG), using the waste in an area landfill as a feedstock.

"This project represents a meaningful step forward for UGI," said Robert F. Beard, the company's chief operations officer. "Demand for RNG is growing, as more individuals and businesses look for an energy source that is safe, cost effective and environmentally friendly."

The decomposition of organic waste gives off methane, which can be captured and utilized. Biomethane contains between 45% and 75% methane by volume, with the rest existing usually as carbon dioxide.

Though processing technology has been around for decades, its usage is on the rise due to supporting policies. Most of the capacity today is in Germany, the United States and the United Kingdom, and that capacity has increased by 4% per year between 2010 and 2018, the International Energy Agency (IEA) found.

The so-called energy transition has only incentivized that further. Developers had ample time during the worst of the COVID-19 pandemic, when demand cratered to the point that crude oil prices turned negative, to pursue new forms of energy.

The war in Ukraine added another push as economies of scale were forced to take an all-of-the-above approach to energy given the Western pressures on Russian crude oil and natural gas. Meanwhile, the pursuit of a net-zero economy means the captured methane is not warming the planet.

Methane has a warming potential that's 25 times greater than CO2. If utilized, the World Resources Institute estimated it could replaced nearly 10% of the conventional natural gas consumed annually.

Not only does that help with net-zero goals, it could in theory alleviate some of the geopolitical strains that have gripped the energy sector for the better part of a year. While RNG does run through conventional infrastructure, given the feedstock it would be assumed that developments would be local rather than international.

"This new RNG facility will be one of the largest in the Archaea portfolio and is expected to bring significant environmental and social benefits to southeast Pennsylvania communities," said Brian McCarthy, Archaea's chief financial and commercial officer. "This new facility will also bring global benefits by reducing greenhouse gas emissions and providing a domestically-produced, affordable, low-carbon source of energy."

British energy company BP announced plans last year to spend around $4 billion in cash, plus another $800 million to cover net debt, to acquire Archaea. With headquarters in Houston, Archaea operates 50 RNG and landfill gas-to-energy facilities across the country. The $4 billion investment may be seen as something of a watershed moment for renewable natural gas.

Critics, however, point to cost as a deterrent. RNG could be about six times as expensive per million British thermal units (MMBtu) compared with conventional natural gas, and its availability is largely limited to areas within the vicinity of the waste stream.

The joint venture in Pennsylvania said it could yield roughly 5,000 MMBtu of pipeline-ready renewable natural gas per day, which would work out to be about 5 million cubic feet of natural gas.

The adoption of that gas, given the cost concerns, runs into a bit of a shale problem. Drawing on the Marcellus shale basin, included in federal data as the Appalachia reserve, Pennsylvania set a record in 2021 with natural gas production, making it the second-largest gas producer after Texas. Total Appalachia output, meanwhile, is expected to be around 35 billion cubic feet per day.

Two-thirds of all households in Pennsylvania use natural gas, which suggests incorporating biomethane would not run into too many issues with infrastructure, though the Energy Department notes that U.S. natural gas consumers spent 37% more on gas in 2021 than they did the previous year, even after adjusting for inflation.

Natural gas in abundance and escalating costs might counter some of the momentum for alternatives in Pennsylvania. The IEA, however, offers an answer in co-mingling: "This is because cogeneration can provide a higher level of energy efficiency, with around 35% of the energy from biogas used to generate electricity and an additional 40-50% of the waste heat put to productive use."

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