Minnesota utility pursues renewable natural gas option

Minnesota utility pursues renewable natural gas option Photo: CenterPoint Energy/Facebook

February 07, 2019 02:49 PM

A Minnesota utility's proposal to offer renewable natural gas under a voluntary green tariff pilot program faces opposition from state officials and clean energy advocates who see better ways to decarbonize the economy.

If approved by regulators, CenterPoint Energy's proposal would likely be the nation's largest renewable natural gas program. Just one other utility in the country, Vermont Gas Systems, has a renewable natural gas green tariff program.

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The program would allow customers to assign a dollar amount on their utility bills to support renewable natural gas. Nick Mark, CenterPoint Energy's conservation and renewable energy policy manager, said the company wants a five-year renewable natural gas pilot to test out customer appetite and the ability of producers to supply it.

"We know that methane can be cleaned up and put on our system," Mark said. "It's not free, but we can do it."

Suppliers would capture methane that would otherwise go into the atmosphere through flaring or other means and process it until it can be added to existing pipelines. Other potential sources include animal waste, biomass from wastewater treatment, and wood and agricultural residue, supporters claim.

The Minnesota Department of Commerce, which recently issued a report on electrification, raised many issues the commission should investigate, while the attorney general said it should be rejected.

The idea also faces stiff winds from clean energy groups, including the Minnesota Center for Environmental Advocacy, the Sierra Club and Fresh Energy, which publishes the Energy News Network.

At the center of the debate is natural gas, the energy of choice for heating for more than 800,000 commercial, industrial and residential customers in Minnesota. With the growth of renewable electricity, clean energy advocates see a diminishing role for natural gas. They contend renewable gas will slow the transformation to electric space and water heating, while others see a longer-term role for gas.

"Renewable natural gas needs to play an important part of the energy mix at least, because it's not realistic or feasible in the short term to switch everything over (to) all electric," Mark said. "It's going to take some time to do that and what we see is a role for gas and renewable natural gas in the interim."

Renewable natural gas, or biomethane, is created from different sources ranging from agricultural waste to landfill methane. One method, anaerobic digestion, employs microorganisms to break down waste into biogas. It has been used in Minnesota and around the country for years. The other approach, thermal gasification, has shown promise but has fewer facilities.

CenterPoint Energy has been contacted by different suppliers, Mark said, but none are based in Minnesota.

"Right now, there's not a great database of where RNG is ... but it tends to be along the coasts and the southern part of the country," Mark said. "A good chunk of (the potential supply) is from landfill gas and there's also manure digestion from swine operations and wastewater treatment plants."


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The renewable natural gas would enter CenterPoint Energy's system at interconnection points with suppliers. The company, the nation's second largest supplier of natural gas, operates in 32 states and has more than 3.4 million customers. No additional pipelines would be added to carry the gas to Minnesota, Mark said.

Under the pilot program, the utility's customers would agree to a dollar amount per month they want to pay to support renewable natural gas, because the price of the gas is likely 10 times that of common natural gas, Mark said. Using other methods — such as taking a percentage of a bill — might lead to sticker shock, he said.

The reason for the high price stems not only from the cost of manufacturing but also tax credits available to producers who sell it to the transportation sector. The federal Renewable Fuel Standard and California's Low Carbon Fuel Standard both incentivize renewable natural gas production for transportation and not for heating or cooling.

"We're expecting, at least in the short term, a higher price to compensate producers for the cost, because why else would they sell it to (a) utility when they can get 10 times the compensation?" he said. "We will get the best price we can."

CenterPoint plans to cap the cost to non-participating ratepayers at $1 million annually while hoping to enroll 8,000 people, or about 1 percent of its Minnesota customer base, Mark said. Most people are likely to assign $10 a month to the tariff.

"You'll get more (natural gas) if the price goes down and less if it goes up," he said.

Obtaining renewable energy credits (RECs) is more troublesome. The Midwest Renewable Energy Tracking System does not have a way to measure renewable gas while the Center for Responsive Solutions has been working on a renewable thermal credit.

"We need an accrediting mechanism but the fact it doesn't exist today isn't a reason to not develop (renewable natural gas)," he said. "We hope a REC gets developed soon for the market."

Minneapolis endorsed CenterPoint Energy's program while not making any promises to buy renewable gas, said sustainability manager Kim Havey. He believes customers should have the option of buying renewable natural gas.

"We think it's a good idea because we're taking an all-of-the-above strategy for reducing carbon emissions and this might be one possibility to reduce carbon emissions from natural gas. And in a state and a city like ours where we have a lot of home heating demand, that's challenging," he said.

Other supporters include the Partnership on Energy and Waste, a coalition of representatives from Hennepin, Ramsey and Washington counties that focuses on waste reduction. The group thinks renewable natural gas eventually could be harvested from organics collected once anaerobic digestion facilities are built. The Bioeconomy Coalition of Minnesota thinks renewable natural gas could lead to economic development and spur the growth of the nascent industry, said Brendan Jordan, who leads the organization as part of his work as vice president of the Great Plains Institute. He is aware of a handful of renewable natural gas projects in the state that have not reached fruition and focus mainly on taking advantage of the tax credits available in California and the Renewable Fuel Standard markets.

"I think this is one of the steps that can help us get projects going in the state," Jordan said.

The two government bodies assigned to study regulatory filings have found CenterPoint Energy's concept lacking. The attorney general's office called the cost of the renewable natural gas "unreasonably high" and suggested if a customer decided to transition entirely over to it, their gas bill would increase by thousands of dollars annually. Should a typical customer want to offset all the natural gas they use annually with carbon credits the cost would be around $50, the attorney general's Public Utilities Commission filing stated.

The $1.3 million CenterPoint Energy plans to spend on marketing and administrative costs "are unsupported" and a "shareholder" incentive is not authorized by state law. The attorney general's office also questions why all ratepayers must share in the risk through a small additional charge and questioned whether demand exists for renewable natural gas.

"The Commission is under no obligation to take on this risk on behalf of Minnesota ratepayers by approving a renewable natural gas tariff at this time," the office concluded.

The Commerce Department raised many of the same concerns in its filing before the commission, adding the utility's two surveys on renewable natural gas attracted a small response that may not indicate whether it will draw enough participants.

The Commerce Department concludes that the pilot is "admirable in terms of enhancing customer choice and environmental protection efforts" while being "premature given the absence of an RNG tracking system and the lack of a credit system for non-vehicle-use RNG."

The Minnesota Center for Environmental Advocacy's Kevin Lee, who directs the climate and energy program, thinks CenterPoint Energy's concept could someday thwart continued electrification efforts by adding natural gas infrastructure to handle RNG. At least at the start, renewable natural gas will not come from Minnesota "so it won't reduce our emissions," he added. "In theory (the proposal) might make sense, but in practice, we're skeptical of this practice."

Methane and biogas should be used to generate electricity and not to replace natural gas, said Margaret Cherne-Hendrick, a Fresh Energy senior policy associate in energy markets. The American Gas Association's own research shows that even if all the country's agricultural feed waste was processed into biogas, the amount would replace just 10 percent of the natural gas consumed, she said.

Trying to find uses for landfill methane and agricultural waste is important in Minnesota, but attempting to create a renewable natural gas market "is an expensive solution," Cherne-Hendrick said. CenterPoint Energy's proposal does not help Minnesota's economy, either, because none of the renewable natural gas will be purchased here.

"I think if we're talking about having to build policy infrastructure to accurately reflect the carbon intensity of these fuels as well as create a credit trading system for them, we would still argue that doing that for renewable electricity created from biogas is a better way to spend our resources," she said.

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Credits

Associated Press

(Copyright 2019 by The Associated Press. All Rights Reserved.)

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