Pursuing Bioenergy Projects in a Dynamic Funding Environment

Organizations are working to become carbon neutral, seeking renewable energy sources, and reducing reliance on regional energy grids. Reductions in greenhouse gas (GHG) emissions are being regulated at state and federal levels and are monetized through various green energy programs. Low carbon, energy recovery projects at wastewater treatment plants are typically discretionary and require a return on investment to execute. As carbon and energy markets evolve, long-term project payback is subject to variability in incentive pricing and can reduce confidence in decision making. Understanding legislation and economic markets around WWTP energy recovery investments are critical to bioenergy project development. The manuscript and presentation will focus on capitalizing on incentives and markets such as Renewable Identification Numbers (RINs), Renewable Energy Certificates (RECs), the Inflation Reduction Act (IRA), the Clean Water State Revolving Fund Green Project Reserve (GPR), and the California Low Carbon Fuel Standard (LCFS). The reader will learn how to align biogas utilization projects with funding opportunities supporting renewable energy generation and low carbon alternative fuel production. Two case studies of recent biogas utilization projects in California are presented to demonstrate a strategy for driving forward the 'right' projects in a dynamic funding and regulatory environment. The first case study describes the City of Roseville's Pleasant Grove Wastewater Treatment Plant, which is completing construction of a grant-funded biogas upgrading to renewable natural gas (RNG) for onsite vehicle fueling, microturbines, and codigestion. The second case study covers the Fairfield-Suisun Sewer District (FSSD) Wastewater Treatment Plant Bioenergy Generation Project, which is installing a new internal combustion engine. Both case studies provide perspective on how to align bioenergy projects with state and federal grants and incentives to maximize return on decarbonization investments and increase confidence in decision making. The City of Roseville (Roseville) is constructing an Energy Recovery project to collect and co-digest organics such as fats, oil, and grease (FOG) and food waste at the Pleasant Grove Wastewater Treatment Plant (PGWWTP). The additional gas production from high strength waste (HSW) will help drive a new biogas upgrading project aimed at delivering renewable vehicle fuel to Roseville's solid waste collection fleet. Microturbines are also installed to utilize tail gas from the biogas upgrading process to produce electricity and heat for the digesters. The Energy Recovery Project began with a comprehensive analysis aimed at determining the best use of biogas in terms of net present value (NPV). In addition to offering economic benefit over the status quo alternative of operating biogas fueled boilers and flaring excess gas, a hybrid microturbine and biogas upgrading to RNG vehicle fuel project affords greater potential for funding opportunities since both standalone projects have grant and rebate possibilities. By running its solid waste fleet (approximately 34 trucks) via a new on-site RNG fueling facility and ceasing diesel use, Roseville will earn credits through the California LCFS program as it reduces greenhouse gas emissions by about 3,655 metric tons of CO2 equivalents per year. The use of RNG as vehicle fuel is also eligible for generating RINs under the EPA's Renewable Fuel Standard. Both LCFS credits and RINs involve a supply and demand driven market that offer ongoing revenue through the sale of credits. Furthermore, generating electricity with microturbines makes the project eligible for the Clean Water State Revolving Fund Green Project Reserve, which incentivizes projects that address water or energy efficiency and reduces costs for utility customers. To-date, the energy recovery project has received approximately $7.18 million of grant funding with support from the California Energy Commission, Green Project Reserve, and Placer County Air Pollution Control District. Roseville also intends on applying for a clean electricity investment credit through the IRA for up to an additional $7 million. Roseville's vision and follow-through in transforming its wastewater treatment process into a highly sustainable, energy-efficient operation positioned them for grants and renewable credits that will improve the financial security of the PGWWTP. FSSD is no stranger to utilizing biogas beneficially through the production of electricity via internal combustion engines. FSSD originally installed their cogeneration system in the late 1980s and has continued to operate engines to produce electricity and provide heat to their digesters. In 2019, with their existing cogeneration engine reaching the end of its useful life and wanting to continue prioritizing 'doing the right thing' with their biogas, FSSD conducted a Biogas Utilization Master Plan (BUMP). The purpose of the BUMP was to identify which modern utilization technology would be the most economically beneficial option for FSSD. These technologies included biogas upgrading to RNG for vehicle fueling, RNG for pipeline injection, or upgrading the existing cogeneration facility. The BUMP included an evaluation of each alternative and included the benefits of various methods of revenue and funding including, LCFS credits, RINs, and the Self Generation Incentive Program (SGIP). The BUMP determined that a new cogeneration facility would provide the greatest benefit to FSSD economically and from an operational point of view. The BUMP lead directly into the design and construction of the Bioenergy Generation Project (BGP), which includes a new 1.2 megawatt (MW) cogeneration engine and gas conditioning, with the existing 900 kilowatt (kW) engine remaining as a standby unit. FSSD did not base the project feasibility on receiving any funding but did anticipate possibly receiving SGIP funding to offset some of the project costs. However, the revised 2021 SGIP guidelines required full biogas upgrading to RNG prior to cogeneration to qualify, which would significantly increase capital costs in exceedance of the SGIP grant. With original SGIP grant no longer feasible, FSSD was forced to a step back, but ultimately decided on proceeding with the BGP as it remained the best option for the plant and beneficial use of renewable biogas aligned with California's climate goals. FSSD's dedication to doing the right thing paid off, as the BGP became eligible for credits through the 2022 IRA that was passed after construction started. The 2022 IRA amended and extended the preexisting Investment Tax Credit and created a new Clean Electricity Investment Tax Credit to include biogas utilization projects. FSSD plans on pursuing an elective payment through the IRA and is anticipated to receive up to 30 percent of the project cost in the form of a direct pay tax credit. In FSSD's case, uncertainties around funding did not determine the fate of the project, but in many cases these opportunities are what establish whether a discretionary energy recovery project is feasible or not for public agencies. Funding is typically available in the form of grants, which are competitive and cannot be relied on in determining project payback during the planning phase. The IRA provides funding in the form of a tax credit with greater certainty that can be considered during the business case evaluation phase. For public agencies planning to develop bioenergy projects, the certainty of the IRA can shift the scales financially and allow the right renewable energy projects to become economically feasible.