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Action on Renewable Gas in BC

Bill Andrews, BCSEA’s lawyer in BCUC proceedings
Tuesday, July 6, 2021

FortisBC Energy Inc. (FEI) is consulting with BCSEA and other stakeholders on plans to substantially expand its Renewable Natural Gas program. Renewable Natural Gas – biomethane – is made from carbon neutral sources such as agricultural waste, landfill gas, sewage and kitchen waste collection. After being cleaned up to pipeline quality standards, RNG can be injected into the natural gas distribution system and used exactly like conventional (fossil fuel) natural gas. CleanBC, BC’s climate action plan, relies heavily on displacing conventional natural gas with RNG and other carbon-neutral substitutes as a method of reducing BC’s GHG emissions to meet the reduction targets.

Under the RNG program, FEI customers can voluntarily pay a premium price to receive 5%, 10%, 25%, 50% or 100% of their gas supply in the form of RNG instead of conventional natural gas. Under BCUC oversight, FEI balances the annual quantities of biomethane that it purchases from third-party suppliers and the quantities it sells to customers in the RNG program. Initially approved in 2013 (by BCUC Order G-210-13), FEI’s RNG program has since been the subject of numerous BCUC proceedings regarding the RNG price, long-term contracts for RNG supply, and cross-subsidization by non-participating customers.

The RNG program got an early regulatory boost when the BC government included renewable natural gas in the Greenhouse Gas Reduction (Clean Energy) Regulation (GGRR). The GGRR defines certain “prescribed undertakings” that the BC Clean Energy Act, section 18, says the BCUC must allow a public utility to carry out and to recover the costs of. The GGRR specified that only 5% of the gas system could qualify as RNG for treatment as a prescribed undertaking. This limit was moot for many years because FEI could not acquire, or sell, so much RNG.

In 2018, the CleanBC plan called for a minimum of 15% of residential and commercial gas to come from “renewable gas” by 2030. Recognizing that it would be challenging to produce and acquire such large flows of non-fossil-fuel gas, the term “renewable gas” was defined to include carbon-neutral hydrogen in addition to Renewable Natural Gas (biomethane). (Similar to biomethane, hydrogen can be injected into the gas system and used in place of conventional natural gas.)

To assist the initiative to have 15% renewal gas by 2030, Energy Minister Bruce Ralston on May 25, 2021 signed an amendment to the GGRR (Order In Council 306) that adds as prescribed undertakings waste and clean hydrogen, synthesis gas (from biomass), and lignin (made from black liquor and used to displace fossil-fuel natural gas used by a pulp mill) and increases the renewable gas eligibility limit from 5% to 15% of the gas system. See: News Release, Ministry of Energy, Mines and Low Carbon Innovation, July 2, 2021, “Province enables increased investments in renewable gas, hydrogen”.

The amendment of the GGRR will certainly help FEI get BCUC approvals. However, it won’t solve all the challenges FEI faces in expanding its Renewable Gas Program. For example:

Supply side. New sources of renewable gas will have to be developed, and long-term contracts acquired by FEI. For biomethane, the technology is fairly well developed but the limited amount of waste organic matter limits the potential volume of RNG. For clean hydrogen, the theoretical volumes are large but cost-effective technology remains to be fully implemented. The future availability and price of renewable gas supply is subject to considerable uncertainty.

Demand side. While some forward-thinking customers are ready and willing to pay a premium price for renewable gas to reduce or eliminate their GHG emissions from the use of gas, selling 15% of the gas system at renewable gas prices will be difficult.

Managing the supply-demand balance. Both new supplies of renewable gas and new large-volume sales of renewable can be “lumpy.” Recently, FEI had to curtail new sales because supplies of RNG had lagged. Currently, FEI is about to receive considerably larger volumes of RNG and it will have to quickly increase RNG sales accordingly.

Who pays? FEI’s RNG program has been paid for largely by the customers who volunteer to pay a premium price for RNG, and secondarily by non-participating customers who pay extra on their bills to support the RNG program. This has worked in the past, but will it be a viable way to fund as much as 15% of the gas in the system? An alternative “clean portfolio standard” approach, that the BC government is understood to be considering, is to legally require FEI to have a certain proportion of renewable gas in its system (say, 15% by 2030) and for all customers to pay for it through their regular rates. This would remove the complications of having to sell renewable gas to customers at a premium price. But what about customers who want 100% carbon-neutral gas (not just 15%)?

Increasingly stringent regulatory requirements. Some municipalities have begun setting their own carbon pollution performance standards for new buildings that preclude the use of 100% conventional natural gas. How could (or should) FEI’s renewable gas program be a mechanism for developers to meet these stringent requirements?

FEI recently provided the BCUC with a very informative update on the issues it is grappling with in its comprehensive review of the RNG program (FEI to BCUC, June 30, 2021). FEI says it anticipates filing a report with the BCUC “in the fourth quarter of 2021.”