RNG’s Next Demand Wave

Alex Rivera 4

Welcome back to Digest This: Unpacking Our Sustainable Future. I'm Alex, here with Emily, and today we're talking renewable natural gas, or RNG, at a really interesting moment. Because on one hand, the EPA just finalized the 2026 and 2027 Renewable Fuel Standard volumes, which is a big policy signal. On the other hand, the market's asking a very practical question: OK, great, but where does the next wave of demand actually come from?

Emily Nguyen 4

Exactly. And for people who don't live and breathe this stuff, the short version is: policy still matters enormously here. EPA's final rule, announced March 27, sets the required RFS volumes for 2026 and 2027. For cellulosic biofuel, the numbers are 1.36 billion rins in 2026 and 1.43 billion in 2027. Total renewable fuel volumes are 25.82 billion and 25.98 billion, with total applicable volumes higher once the small refinery exemption reallocation is added.

Alex Rivera 4

And that last part is where people in project finance immediately lean forward a little. EPA also finalized a 70 percent reallocation of small refinery exemptions granted for 2023 through 2025. Which sounds, admittedly, like the kind of phrase that clears a room at a party.

Emily Nguyen 4

It really does. But it matters because exemptions can reduce obligated demand under the RFS. Reallocating a portion of that back into future compliance years helps preserve demand for credits instead of letting a hole open up in the market. So if you're a developer, lender, or utility looking at RNG economics, this is partly about confidence that the credit system still has some structure underneath it.

Alex Rivera 4

Right. Not perfect certainty, because this market never gives you that, but more certainty than a drifting policy environment. And EPA also removed renewable electricity, e-rins, as a qualifying renewable fuel under the RFS. That's a meaningful choice. It narrows the program back toward liquid and gaseous fuels, which, for RNG producers focused on transportation fuel pathways, is pretty relevant.

Emily Nguyen 4

Though there's a wrinkle. EPA also partially waived the 2025 cellulosic biofuel volume requirement because of a production shortfall. So the message is kind of mixed in a very real-world regulatory way. It's supportive, yes, but it's also acknowledging that actual supply has limits. That's important because people sometimes talk about policy as if passing a rule automatically creates molecules. It doesn't.

Alex Rivera 4

That's such a good point. A rule can improve the runway, but somebody still has to build the digester, secure feedstock, get interconnection, sign offtake, survive construction, all of that glamorous stuff. And what's fascinating is that Waste Dive, citing the American Biogas Council, noted how much this sector's growth has been pulled by transportation policy. The RFS and California's Low Carbon Fuel Standard created strong incentives to upgrade biogas into transportation-ready RNG.

Emily Nguyen 4

Yes, and that may be the next inflection point. The ABC's policy team suggested transportation demand for RNG may be nearing its peak, or at least maturing. Meanwhile, electricity demand is rising, with Heather Dziedzic, Vice President of Policy for the American Biogas Council, noting that power demand tied to artificial intelligence is pushing up the value of electrons. So there is a genuine question now: do future biogas projects keep chasing transportation fuel credits, or do some of them pivot back toward electricity?

Alex Rivera 4

And I think that's the strategic question underneath all the headlines. If you're a developer, are you still building for trucks? Are you building for pipeline injection with utility-backed procurement? Are you looking at power? Maybe even maritime someday, which the ABC mentioned as a market that's not really open yet, but maybe cracked open.

Emily Nguyen 4

So the takeaway from the rule is not just, "EPA finalized some numbers." It's that the rule reduces a layer of uncertainty for biofuels, supports credit market continuity through that 70 percent reallocation, and reinforces RNG's role in transportation fuels for now. But it also sharpens the question of what demand driver comes next if transportation stops being the singular growth engine.

Alex Rivera 4

Yeah. The policy reset helps. It does not end the bigger market debate. If anything, it makes that debate more urgent.

Emily Nguyen 4

And that brings us to the market itself, which is growing, but not in a straight line. According to the American Biogas Council's Biogas in America 2026 report, 70 new biogas projects came online in the U.S. in 2025. That's the lowest number of new facilities since 2019. Waste Dive linked that slowdown to regulatory uncertainty and the need for new market outlets.

Alex Rivera 4

But this is where the story gets more interesting than a simple slump headline. Those 70 projects still represented about $2.1 billion in investment. Since 2020, the number of facilities producing RNG has tripled, and the amount of RNG produced has doubled since 2022. So it's slower project starts in 2025, yes, but against a much bigger installed base than the industry had a few years ago.

Emily Nguyen 4

Especially in agriculture. Farm-based RNG facilities grew from 90 in 2020 to 414 in 2025. By the end of last year there were also 159 landfill RNG facilities and 53 wastewater facilities producing RNG. So I don't want listeners to hear "slowdown" and assume "collapse." That's not what the data says.

Alex Rivera 4

Totally. It's more like the industry took a breath. And meanwhile, you still see projects moving. One that really stood out to me was the food-waste anaerobic digestion facility in Louisville Township, Minnesota. It just broke ground, and it'll accept up to 75,000 tons of organic waste a year, mainly from the Ramsey/Washington Recycling and Energy system serving St. Paul and nearby suburbs.

Emily Nguyen 4

That project is a great example of local conditions driving infrastructure. Minnesota has been dealing with disposal capacity pressure after waste-to-energy closures and declining landfill space. The state had already directed the Twin Cities metro area to reduce waste. This facility fits that landfill diversion need, and it has public funding support plus gas offtake agreements with CenterPoint Energy and Xcel Energy under Minnesota's Natural Gas Innovation Act.

Alex Rivera 4

And it's not just making gas. The project is expected to produce about two-hundred thousand M.M.B.T.U's of RNG and 8,000 tons of biochar annually. I like this one because it shows RNG projects are often waste system projects first, energy projects second. They're solving disposal headaches, contamination issues, methane emissions, and then creating energy value on top.

Emily Nguyen 4

In California, the major signal is the CPUC-backed long-term biomethane procurement contract tied to Anaergia's SoCal Biomethane facility. It's being described as the first RNG project to supply under SB 1440. That matters because SB 1440 creates a compliance-driven utility demand channel for RNG derived from landfill-diverted organic waste. Different policy logic than the transportation-credit story we were just talking about.

Alex Rivera 4

And the project itself is substantial. It's at the Victor Valley Wastewater Reclamation Authority, co-digests organic waste and municipal wastewater, can take up to 104,000 tons of diverted organic waste a year, and has potential emissions reductions of up to thirty-one thousand seven hundred ten metric tons of CO2 equivalent annually. That's the kind of deal developers love to point to because it says, hey, utilities may finally be a bigger part of this market.

Emily Nguyen 4

Then you've got the recent project momentum examples. In Napa, BHS, Napa Recycling, and the City of Napa announced a public-private partnership for a dry anaerobic digestion and RNG facility at an existing composting site. The RNG is expected to fuel Napa Recycling's truck fleet, which is a very circular use case.

Alex Rivera 4

And at Couco Creek in Turlock, Maas Energy Works completed an interconnection with PG&E. What I think is clever there is the hub model: they refine biomethane from the dairy onsite, but they can also accept trucked-in RNG from other sites like Blue Sky Dairy through what they call a virtual pipeline approach. Full capacity is around 350 MMBTU per day.

Emily Nguyen 4

And then you have large scale industrial projects like ours. Our two facilities, Bluegrass Renewable Fuels in Boston Kentucky and Lynchburg Renewable Fuels in Lynchburg Tennessee, are each expected to produce around one million MMBTUs annually.

Alex Rivera 4

That's right Emily, we are working with two of the largest distilleries in the country, converting their stillage into RNG and soil nutrients. The scale of these operations is immense. These projects are significantly reducing energy use, emissions, and providing a steady reliable offtake for the companies we are working with, while also creating soil nutrients that can be used on surrounding farmland. It really is just a win win win scenario.

Emily Nguyen 4

You are spot on Alex. I can see a lot more industrial AD systems like these coming in the future where companies with a homogenous organic waste stream are able to really benefit and help the surrounding area from working with companies like, 3 Rivers Energy Partners to get setup with not just an AD system but a contract with them that works for everyone.

Emily Nguyen 4

So if we zoom out, the big takeaway is pretty clear. RNG growth is real. The buildout in farms, landfills, and wastewater proves that. But the next phase likely depends on three things: clearer policy, more utility support and interconnection pathways, and new market outlets beyond the transportation story that dominated the last few years.

Alex Rivera 4

Yeah. Fewer headlines about hype, more headlines about infrastructure actually penciling out. That's probably where this industry is headed next. Emily, this was fun.

Emily Nguyen 4

Always fun. And we'll keep watching where policy and project development meet in the real world.

Alex Rivera 4

Thanks for listening to Digest This. I'm Alex.

Emily Nguyen 4

And I'm Emily. We'll talk to you next time.