BP chief forecasts 10-fold increase in US biogas production by 2030
We need to accelerate the transition to renewable fuels
Biogas has a significant role to play despite clamour for electrification
New markets include rail, maritime, and industrial applications
BP’s Vice President Strategic Development, Global Environmental Products Harrison Clay has forecast US biogas production will increase 10-fold by 2030.
Addressing a webinar hosted by Thomson Reuters, Mr Clay said, “Over the next decade I would hope at a minimum that the sector would keep growing at the rates it has. That would mean billions of gallons (equivalent) of renewable natural gas (RNG).
“By 2030 I think a very large volume will be used in non-vehicle markets – maritime, rail, utilities, high-heat applications and heavy industry. We’ll see RNG grow another tenfold by 2030. There will be more than enough opportunities.”
Clay brought his considerable experience of developing biogas projects to the table. Clay was formerly president of Clean Energy Renewable Fuels, which developed its own anaerobic digestion plants and was producing and selling 60m gallons (equivalent) of RNG annually through its own filling stations, when it was bought out by BP in 2017.
Clay was invited to address the challenges associated with the transition to low carbon products and the impact of the collapse in oil price on the RNG transport fuel market.
Covid-19 has been a wake-up call
The pandemic has been a wake-up call, the fall in demand for oil a sign a what’s to come.
Clay explained, “Pre-Covid, BP and all majors were making big announcements regarding decarbonisation. BP was aiming for net zero by 2050, that’s the total transformation of the business. That’s where we were pre-Covid. To continue to meet demand and reinvest in lower carbon and new renewable energy tech, that was the strategic overhaul we were in.”
The collapse in the price of oil occasioned by the pandemic, it stood at $43 a barrel of Brent Crude on 15th July, meant BP and all majors would have to think about accelerating the transition “now you can’t sell your product at a profit”. This is because that the slump in demand does not match what is required to deliver on the Paris Climate Agreement.
As a consequence of Covid-19, there has been a 5.5% drop in CO2 emissions, less than the 7.7% that is required to meet the Paris agreement. “So, the downturn is not getting us to where we need to be, which underlines the scale of what we have to do. That should be a positive for renewable energy and biogas. It creates an imperative. That is the big picture.”
He also noted, that any fall in demand meant the major oil and gas producers had less profit to invest in the transition. Nevertheless, the transition would happen as it would be an “environmental tragedy to burn all the hydrocarbons available” and peak oil – demand and supply – would occur in the next two decades.
While biogas producers had suffered from the Covid-19 downturn, with less demand for RNG transport fuel, “long term the market is going to be strong”, Clay said.
The role for biogas in an electrified world
The sector would have to overcome negative campaigning from the environment movement which has ‘unfortunately taken to attacking RNG over its green credentials’. This includes the influential Sierra Club.
He had a robust response for such critics. “Biogas is an inevitable consequence of waste and there will always be waste. Biogas is a waste conversion system and that often gets lost as we look at it purely as an energy generating process. Biogas is always going to be there, either being vented or flared, and that doesn’t make sense. We might as well use it. It is a part of the decarbonisation energy mix.”
He said the green movement’s focus on electrification was understandable, as it has a major role to play, but not to the exclusion of all else, and that means there is a significant role for biogas. “We will need energy in greater and greater quantities, and we will need every one of the renewables. We have all this biogas available. Capturing it is so important. Throwing a cover over a digester, capturing the gas and off-setting diesel – that’s a good thing.”
Possible markets outside of RNG transport fuel included increasing demand from utilities, high-heat applications, industrial, marine and rail.
Even if a hydrogen economy becomes dominant, “biogas has a great role to play. You can produce hydrogen from methanation and California already mandates green hydrogen. So, this is positive news for biogas.”
The flipside is that hydrogen trucks become the principal platform for decarbonisation of the heavy goods vehicle sector which would reduce demand for RNG transport fuel. “There is a possibility that hydrogen trucking will be the future and that might slow down low NOx fuels. I hope that’s not the case, I think it would be the wrong thing to do. We have a fuel that works at a price that’s affordable that can be deployed at scale today, delivering emissions reductions and air quality improvements.”
The demand for the fuel would remain strong and would grow, as “combustion engines are going to be with us for a long time across rail, shipping and industrial applications”.
Where BP is looking to invest in biogas
Would BP be putting its money where its mouth is and invest in biogas production, Clay was asked?
Not directly. The problem he said was one of scale. “Like all majors, BP is put off by the small scale of projects. None of their systems are designed to be applied at this level, they don’t scale down. Therefore you need an operational partner in this space, to develop a platform that can be scaled up and achieve economies of scale; the more predictable you can be with your financials and the more carbon you can offset the better. It’s those kinds of investments we’re looking at closely.”
Finally, he addressed a number of policy issues impacting the American industry. The Infrastructure Bill, which is currently before parliament, has a clause for Investment Tax Credits to be extended to biogas, which will have a positive impact on development by reducing the upfront capital costs
Meanwhile, the renewable fuel standard is being reviewed toward the end of the year. The outcome will depend on the make-up of EPA, which depends on the outcome of the Presidential election in November.