LFG-to-RNG production to more than double by 2030, but project success depends on location and scale according to Wood Mackenzie
12 August 2024 - 4:00PM
PRESS
RELEASE
LFG-to-RNG production to more than double
by 2030, but project success depends on location and scale
according to Wood Mackenzie
LFG-to-RNG offers lowest cost option for
RNG production, but only 10% of resource potential currently
tapped
LONDON/HOUSTON/SINGAPORE, 12 August
2024 - Landfill gas remains the most popular
feedstock option for renewable gas production (LFG-to-RNG), but
project pre-tax breakeven prices can range, with success relying
heavily on location and scale, according to a new report from Wood
Mackenzie.
LIn the report “Trashing your way to a cleaner future: landfill
gas as a feedstock for RNG in North America” Wood Mackenzie finds
that LFG-to-RNG capacity has nearly doubled in the last five years,
and the prospect for more activity is considerable, with only 10%
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,” said Dulles Wang, director of
research at Wood Mackenzie. “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.”
According to the report, four main factors contribute to the
ultimate success of an LFG-to-RNG project, which include:
- 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,” said Wang. “Despite cost variations,
LFG-to-RNG is the lowest-cost option for RNG production, and the
subsidy value of RNG could reach over US$20/mmbtu when considering
stacking of different Environmental Attributes.”
According to the report, currently RNG pre-tax breakeven price
ranges from US$4 to US$35/mmbtu, with an average of
US$15/mmbtu.
Market poised for growth
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.
“With population growth, we expect more landfills,” said Wang.
“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 notes that challenges still exist, such as the relatively
high CI compared to other RNG technologies potentially driving
investors away as they seek higher returns from subsidies.
Challenging economics for small-scale or more remote projects may
also hinder the pace of long-term project development as costs rise
for second tier resources, while inflationary pressures in recent
years may affect cost breakevens structurally.
“Despite some challenges and unknowns, we see a bright future
for LFG-to-RNG,” said Wang. “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.”
Learn more here.
For further information please contact Wood
Mackenzie’s media relations team:
Kevin Baxter +44 330 124
9400Kevin.Baxter@woodmac.com
Vivien Lebbon+44 330 174
7486Vivien.lebbon@woodmac.com
Mark Thomton+1 630 881 6885
Mark.thomton@woodmac.com
Hla Myat Mon +65 8533
8860 hla.myatmon@woodmac.com
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agency)woodmac@bigpartnership.co.uk
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