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Breakdown of the 3 pillars in the context of renewable natural gas (RNG)

Gabe Olson discusses how the 3 pillars affect the renewable natural gas sector of the hydrogen industry.

Breakdown of the 3 pillars in the context of renewable natural gas (RNG)

"The three pillars, in this context, essentially concern themselves with the concepts of additionality, hourly time matching, and directionality. Additionality is the concern that for a given unit of renewable energy, there's an existing demand on that source. If the hydrogen production comes online and utilizes existing renewable electricity sources, it potentially could take away from other current uses. So the argument goes that green hydrogen should instead be required to be contracted with new sources of renewable energy production. This is very challenging because how do you simultaneously permit and finance a solar project, for example, and a large electrolyzer and the associated hydrogen infrastructure? It becomes untenable.

Now, compare that to renewable natural gas (RNG). Renewable natural gas as a feedstock, as a source of renewable energy, is inherently additional. RNG projects, in fact, are only getting built once they are fully contracted for the supply that they produce. There is so much additional production capacity in the RNG market that will actually come on over the next 10 to 20 years. The estimates are that only something like 7% of RNG production capacity or potential capacity is currently online in the United States or in the pipeline, but it's growing every day. That can expand almost exponentially. At some point in the future, there will be a need to redeploy some of those RNG facilities and use their output for something else. Long-term RNG off-take contracts are actually for about 10 years, and in fact, that timeline generally aligns with the duration of the production tax credit under the Inflation Reduction Act, so there's a close alignment there that would actually address that concern.

Time matching is the second pillar that's often discussed. This is the concern that for a given electron taken from the grid for green hydrogen production, it must be correlated to a specific renewable electron that's put into the grid. This is due to the instantaneous nature of electricity, the lack of sufficient grid storage battery technology that's currently available. The fear is that matching energy use over monthly or annual time periods would result in inadvertent use of dirty coal power, for example, or other fossil-based electricity generation on the grid. That may ultimately drive up overall emissions due to spiking power demands during certain parts of the day across different regions of the grid. While those concerns may have their validity or their worth in that debate, RNG as a resource functions very differently from electrons in the grid. The energy content in the gas molecules or the methane molecules that are injected into the interstate pipeline are stable. They don't lose energy over time and can be used at any time of the day, month, or season. They can be stored indefinitely. The pipeline itself is, in fact, the storage facility, and there are other large underground storage facilities that are currently in use across the United States. So time matching really doesn't apply in the case of RNG.

Deliverability is the third pillar. It has to do with regional restrictions and is similar to time matching in terms of the overall concern. It's focused on the variable carbon intensity of different parts of the power grid and the constraints on different power transmission systems and potential inability to deliver electrons in certain locations. There's a need for real-time load balancing across electricity systems, which is a real concern. RNG, just like we're talking about with time matching, is possible to store and is entirely fungible, useful at any time without restriction. The injection of RNG in one part of the US pipeline network, regardless of where the RNG credits are accounted for, can offset the use of traditional fossil natural gas on an ongoing basis locally. Because greenhouse gases are a global issue everywhere, it doesn't actually matter where that exchange happens or where the injection happens or the actual credited end use. From this discussion, you can see that there is a distinct difference between renewable natural gas and the way that electricity is used in the grid."

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