The Opportunity for Renewable Natural Gas in Canada

Currently, in the provinces of British Columbia, Ontario and Quebec, natural gas distribution utilities are putting RNG into the pipeline distribution system. By the end of 2016, utilities will have brought online eleven RNG projects producing enough renewable fuel for 51,000 homes or equivalent to approximately 132 million litres of renewable fuel for transportation markets.

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In Ontario, there is a single RNG project in Hamilton from the municipal waste water treatment facility. The Region of Peel and the City of Toronto have expressed great interest in producing RNG from source separated organic waste that they collect. But, at opposite ends of Canada, two communities have quietly set themselves at the forefront of the North American renewable natural gas movement, displacing fossil fuels and reducing emissions from landfills by converting organic waste into methane.

In Quebec, Saint-Hyacinthe, the town of 53,000 runs the second-largest anaerobic digester in the world, converting its own organic waste, that from neighbouring municipalities and near-by agri-food industries to RNG, meeting well in advance provincial legislation banning organic waste from landfills by 2022.

By the end of this year, the facility will be at full production, producing 13 to 16 million cubic metres of gas per year distributed by provincial utility Gaz Métro, reducing fuel costs for the municipal fleet and creating revenue through waste collection fees.

Across the country, in Surrey, British Columbia, municipal council hit on anaerobic digestion as a cost-effective means to meet its goals of diverting 70 per cent of its waste, reducing its carbon footprint and establishing organic waste biofuel production for its garbage collection trucks. Second in size only to Vancouver, the B.C. city of 520,000 will generate about 120,000 gigajoules of power (3.1 million cubic metres gas) when its biofuel facility comes online in 2017. It will also be the first fully integrated organic waste system in North America – where RNG-fueled trucks collect the waste that creates the methane they run on.

Renewable natural gas is natural gas produced from organic waste from farms, forests, landfills, and water treatment plants. The gas is captured, cleaned, and injected in pipelines to be used in the same way as natural gas by homes, businesses, institutions, and industry. Harnessing even 10 per cent of Canada’s RNG potential would generate enough clean energy to heat 1 million Canadian homes for a year.

This is accomplished when microorganisms break down biodegradable material in a space where there is little to no oxygen, resulting in the production of methane and carbon dioxide. The gas then requires purification to remove the CO2 and meet pipeline standards for distribution and ultimate use in heating, power generation and, in a compressed state, as a transportation fuel.

This year Canada’s natural gas utilities have set a target of 5 per cent RNG-blended natural gas in the pipeline distribution system by 2025 and 10 per cent by 2030. Nationally, the increased RNG content would result in 14 megatonnes (MT) of greenhouse gas emission reductions per year by 2030, equivalent to removing 3 million passenger cars from the road.

For all utilities the target is ambitious. For FortisBC, in 2015, RNG represented about 130,000 gigjoules per year of its 115 petajoule core load – a fraction of one percent of the total. And there is no provincial subsidy on the cost, which comes to about $14.41/gj or five cents per kilowatt to the utility. While that is within the range of renewables such as wind power (7-8 cents/kWh), firm government policies supporting RNG would go further.

“FortisBC currently receives RNG from four operating projects, in the Fraser Valley, from the Salmon Arm and Kelowna landfills and the Sea Breeze Farm in Delta, B.C.”

“FortisBC currently receives RNG from four operating projects, in the Fraser Valley, from the Salmon Arm and Kelowna landfills and the Sea Breeze Farm in Delta, B.C.”

“The biggest thing the government can do is give certainty that this is an important part of the overall portfolio for the gas industry,” says Scott Gramm, the utility’s renewable gas program manager. “And one of the very practical things that they could do is have policies associated with some sort of renewable portfolio allowance. In other words, give clarity to project developers, the utilities, customers to say yeah, we think this is important to RNG, here is the policy to support that.”

The utility currently receives RNG from four operating projects, in the Fraser Valley, from the Salmon Arm and Kelowna landfills and the Sea Breeze Farm in Delta, B.C. The Surrey project will double the volume, and there are more projects to come.

“A huge advantage (of RNG) is you are taking advantage of a local waste source and making use of it – you are putting dollars back into the local economy, you are making use of the structure that is already in place, in the form of the natural gas utility, and you are displacing methane emissions by now putting them in a controlled environment where you are capturing the methane emissions,” Gramm says. “And you can also displace conventional natural gas in the pipeline.”

Government and Industry Support Key to Success

Provincial and federal support and subsidies were critical to Saint-Hyacinthe increasing its RNG facilities, providing a third each of the financing for the $85 million plant, says Donald Cote, town councillor and agrologist.

The city had been producing RNG since 2009, saving about $2-million a year in transportation and disposal of waste. But to gain revenue, they needed more volume – which they got through waste collection contracts with local cheese and yogurt manufacturers.

“Creating partnerships with industry is paramount to our success,” Cote says. “Not only do we get the extra gas production, we get a tipping fee from those companies. Instead of sending it to a garbage dump, they are paying us to collect the waste.”

“Creating partnerships with industry is paramount to our success.”

“Creating partnerships with industry is paramount to our success.”

“A huge advantage (of RNG) is you are taking advantage of a local waste source and making use of it.”

Gaz Métro provides the interconnection to get the gas into the grid, plus the equipment to monitor the quality of the gas, which goes from 60 per cent methane to pipeline-ready 98 per cent after being “scubbed” at the purification plant. The investment in the equipment is paid back by the producer – the city – over 20 years, and St. Hyacinthe also pays a transportation tariff.

The utility offers the technical expertise to help producers make RNG projects happen by providing support on quality control levels, technical levels, and the business model, in addition to connecting to the natural gas distribution network. “The benefit from Gaz Métro’s point of view is that we have all this infrastructure in the ground and we know over the long term there is going to be more of a move to bring RNG online,” says Donald Beverly, senior advisor, development and renewable energy at Gaz Métro. “Renewable natural gas fits in because we are displacing natural gas in the system. The other thing is, renewable natural gas serves as methane abatement, repurposing things that are emitting methane into the atmosphere right now.”

With five public (municipal) and two to five more private projects, mostly landfill operators, coming up over the next two years, RNG volumes will increase, but also will be dependent on pricing.

“If the market steps up, we hope to get five per cent RNG by 2025 of annual distribution of 200 billion cubic feet per year.”

“If the market steps up, we hope to get five per cent RNG by 2025 of annual distribution of 200 billion cubic feet per year.”

“If the market steps up, we hope to get five per cent RNG by 2025 of annual distribution of 200 billion cubic feet per year, so about 280 million meters cubed per year of renewable natural gas over the next few years,” adds Geneviève Paquin, Advisor, Business Development and Renewable Energy at Gaz Métro. The biggest challenge is the market is new and the prices are not high enough to support new projects on their own. “Once we have a good price, we will see a lot of great projects,” she says.

Back in Surrey, engineering manager Robert Costanzo says a public-private partnership was the best option for the city to achieve its goals around waste management, with the federal government kicking in 25 per cent of the capital for the $68-million project. The city partnered with a Dutch company, Orgaworld Canada, for a 25-year term, where Surrey supplied the land and organic waste and the company built and will maintain and operate the 115,000 metric ton per year facility. Both have threshold agreements on waste delivery and RNG production to meet or pay.

The gas produced will be used by waste a collection fleet, 45 compressed natural gas trucks will use about 65,000 GJ, the balance to be used by a growing number of CNG vehicles. “The economic benefits are quite significant – on the waste collection side, previously with manual collection it was about $12.5-million per year; the new system is $9.5 million,” Costanzo says.

It will also “obliterate” the city’s 16,000 metric tons per year carbon footprint, eliminating carbon emissions by 40,000 metric tons per year through diversion of organic waste and use of RNG. “And we will have an additional 20,000 metric tons of carbon credits to sell on the market,” Costanzo says.

Approximately 7,000 FortisBC residential and commercial customers pay the premium to natural gas, which averages about $2.40/GJ, when choosing to include RNG in their gas supply. They do save about $1.48/GJ by not having to pay the provincial carbon tax, Gramm adds. He is optimistic supply will increase in the years ahead, but notes a number of factors could come into play before others adapt the Surrey model, such as access to capital, the size of a municipality and the amount of waste it can access, as well as availability of a pipeline gathering and distribution system.

Challenges

As biomethane is relatively new, it does not fit existing policies, not just around fuel but its by-products, proponents note. An example is human or animal waste that has been through a digester and produced gas: the residual product is no longer manure or sewage but it’s not classified as compost and there are no guidelines around its use. “So there is a need to develop new policies and regulations.

As Gaz Métro’s Beverly sees it, getting privately owned landfill operators more involved in RNG would be a big step as landfills produce about eight times more gas than organic waste. But they need a strong market price to justify the expense. Agricultural waste would be another contributor but farms are generally low density and often far from an existing natural gas pipeline grid. Options could include trucking gas from a number of farms, thereby gaining economy of scale, to a distribution centres.

As well, governments can provide support for innovation to help accelerate the quality of the technology around RNG and drive down costs, adds Gramm.

Dina O’Meara is former business writer with the Calgary Herald and is now a communications consultant.