The renewable natural gas industry is looking for ways to modify a new tax credit so manure digesters benefit from a measure meant to incentivize clean hydrogen production.
As it is, the rule for the 45V credit that the outgoing Biden administration recently finalized doesn't do enough for hydrogen producers to take advantage of it by using biomethane, or renewable natural gas, industry experts say. Among their concerns: a delay in "book and claim" accounting, prohibition on averaging carbon intensity scores from different feedstocks, and the way manure’s carbon intensity score is calculated.
“I think everything's on the table because of the administration change and the fact that these agencies could be directed, either by the White House or by Congress, to revisit these for any number of reasons,” said Heather Dziedzic, American Biogas Council vice president of policy.
Although the rule could be rescinded by the Trump administration, that could take a while, she said.
“We've got a lot of capital pent-up in the outcomes of these rules, and waiting around for another two years to get this through a whole big, formal rulemaking is probably not ideal,” Dziedzic said. “That being said, there are always opportunities for technical corrections,” which she identified as “probably most appropriate” for dealing with CI scores.
Other provisions such as book-and-claim, a widely used practice in the RNG industry that would be delayed until Jan. 1, 2027, and the absence of certain pathways, such as food waste, "are going to take a heavier lift," she said.
The Coalition for Renewable Natural Gas said in a statement that it's "interested in helping to develop U.S. hydrogen policies that are consistent with on-the-ground realities of how our industry works, with particular consideration for the substantial share of dairy cow-RNG within the U.S. RNG portfolio, as well as established norms for book-and-claim accounting that undergird environmental attribute crediting and practical trade of RNG."
Dziedzic was critical of the way Treasury determined the CI score for manure, by aggregating all forms of animal waste to come up with a benchmark of manure-derived RNG of -51g CO2 per megajoule, or MJ (a unit of energy). That score goes to -31g CO2 per megajoule when the carbon intensity of upgrading biogas into RNG is taken into account.
Heather DziedzicThe CI score for dairy biogas under California’s Low Carbon Fuel Standard is much more favorable for dairy digesters, which comprise the bulk of the 400 digesters in operation in the U.S. Another 73 are under construction, the rule said.
“It is estimated that the waste from roughly 8% of dairy cattle and 2% of swine (by head) is currently sent to anaerobic digesters and these numbers increase to 10% and 3%, respectively, if digesters currently under construction are included,” Treasury said in the rule.
Most of the new projects are upgrading their biogas to RNG due in part to incentives provided by the federal Renewable Fuel Standard, California’s Low Carbon Fuel Standard, and a California grant program, the rule said.
As an example, a dairy digester in California can use a specialized California GREET model from the Energy Department’s Argonne National Laboratory to come up with a “fully valued” CI score of -350, said Dziedzic. If they choose to use 45V, with its -31 CO2/MJ, they’ve “now somehow lost almost 10 times” of their carbon market value, said Dziedzic.
“Because dairy digesters under normal GREET treatment are highly negative, they're losing a ton of carbon value by sending this to the hydrogen market,” she said.
ABC and other groups say another way digester-produced biomethane gets undervalued in 45V is through its prohibition on averaging CI scores from blended feedstocks.
“You can physically blend the molecules, but when it comes to how the carbon intensity scores shake out, you can't blend the CI scores,” Dziedzic said.
In a statement to members, ABC said “this is common practice to achieve desired carbon reduction while balancing cost of production, and could be significant.”
On the other side of the issue, Julie McNamara, deputy policy director with the climate and energy program at the Union of Concerned Scientists, said, “We think that methane is a problem on these farms, and to the extent that it exists, we think we should capture it and put it to productive use. But we should not take a policy that exists to create clean hydrogen and turn it into an incentive for subsidizing manure operations in the dairy industry.”
“If you create a policy that subsidizes the creation of that methane to avoid it, then you risk driving an increase in the production of that methane in the first place,” she said. “There's this real risk of perverse incentives.”
Julie McNamara“At the end of the day, to really enable the decarbonization that hydrogen is supposed to be able to achieve, it has to be clean, and if that takes rigorous rules, then that's what we need,” McNamara said.
The rule requires that “determinations of alternative fates for methane derived from biogas, RNG, or fugitive methane consider the risk that the availability of tax credits creates incentives to produce additional methane.”
“In settings where a significant but non-identifiable share of methane from some sources could be produced in response to incentives provided by the section 45V credit or other programs, alternative fate assumptions that result in highly negative emissions estimates are likely to be inaccurate and understate the real-world lifecycle GHG emissions,” the rule says.
But it adds that while the Energy Department’s emissions “could provide incentives to generate new waste, this concern is ameliorated to a degree by the requirement in these final regulations to assess each hydrogen production process by grouping major inputs with similar attributes, rather than allowing blends of feedstocks with different attributes to be evaluated as a single production process.”
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