Arlene Karidis, Waste 360 Published: April 29,2020
Credits for renewable natural gas, made possible through the federal Renewable Fuel Standard Program and California’s Low-Carbon Fuel Standard (LCFS), have been the bread and butter sustaining RNG projects for years.
Biogas investors basically fall into three categories. The first group is private equity investors, which are mainly energy and infrastructure funds. There are dozens of them in the U.S., and they control billions of dollars of potential capital, according to John Hanselman, chairman and CEO of Vanguard Renewables in Wellesley, Mass.The second category of biogas investors is gas utilities. Vanguard recently entered a $200 million deal with Dominion Energy to build natural gas-generating facilities that process manure on dairy farms across the U.S. SoCal Gas in California is investing in RNG. Oregon’s Public Utility Commission recently determined that utilities could have ratepayers partially fund build-out of RNG infrastructure. And FortisBC in British Columbia bought three biogas upgrading plants to make RNG to sell to its customers.
The third category of biogas investors is banks. Historically, AD has not been an energy-producing interest to commercial banks. Now that they have seen long-term offtake and acceptable business models, an increasing number are willing to lend capital to developers, says Hanselman.
“If you don’t have all three, there is no way to get financing,” Hanselman says. “The downstream component — convincing offtakers to commit to a long-term agreement — is the biggest challenge, because most energy in the U.S. is not traded on the 10- to 20-year terms lenders would like to see. But long-term agreements are needed as a safety net for equity and debt investors.”