Wood Mackenzie report reveals growth of landfill gas to renewable gas capacity

A new report by Wood MacKenzie finds that landfill gas (LFG) to renewable gas (RNG) capacity has nearly doubled in the last five years.

The report, called “Trashing your way to a cleaner future: landfill gas as a feedstock for RNG in North America,” also revealed that the prospect for more LFG-to-RNG activity is considerable, with only 10 percent of the resource potential currently being utilized in North America.

“The LFG-to-RNG sector has been extremely active in the last two years with new project ramp-ups, blockbuster M&A deals and new players entering the market,” Dulles Wang, director of research at Wood Mackenzie, said. “The sector is also consolidating, with the top seven developers making up more than 60% of the market today. As RNG is a direct substitute for fossil-based natural gas, there is tremendous potential for future growth and its prospects in carbon reduction goals.”

The report cited four main factors that contribute to the ultimate success of an LFG-to-RNG project. They are:

• Economies of scale: Economies of scale have the largest impact on project costs, as studies have noted a stronger correlation between cost and scale than cost and upgrader technology type.
• Location: An RNG upgrader’s proximity to a landfill has the largest impact on the interconnection costs and states with more stringent environmental regulations can increase costs as well.
• Upgrader technology: Capital costs for upgraders can vary based on technology type.
• Operational efficiency: Operating costs can range from 3% to over 60% of capital costs, with a significant portion coming from utility costs.

“When factoring all of these drivers into play, making an LFG-to-RNG project work requires collaboration between landfill owners and RNG developers, and costs vary significantly from project to project,” Wang said. “Despite cost variations, LFG-to-RNG is the lowest-cost option for RNG production, and the subsidy value of RNG could reach over $20/mmbtu when considering stacking of different Environmental Attributes.”

Currently RNG pre-tax breakeven price ranges from $4 to $35/mmbtu, with an average of $15/mmbtu.

In its outlook, Wood Mackenzie forecasts that the resource potential could exceed 5 billion cubic feet per day (bcfd) by 2050, up from less than 4 bcfd today, and that production could reach 2.2 bcfd by 2050, up from .3 bcfd today.

“Landfills are one of the largest sources of methane and increased scrutiny by governments on methane regulation will likely boost more LFG-to-RNG conversions. Not to mention, policy incentives have targeted the RNG industry as demand for it rises – especially in the transport sector. The relatively lower carbon intensity (CI) of the LFG-to-RNG process on a life-cycle basis compared to conventionally produced natural gas provides the economic justification for the subsidies. we expect more LFG-to-RNG projects to take off due to attractive economics,” Wang said.

Wang sees a bright future for LFG-to-RNG.

“RNG will play an increasing role in decarbonizing North American economies, and with LFG-to-RNG capacity nearly doubling in the last five years, we expect the trend to continue in the foreseeable future,” Wang said.

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