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Black Hills Energy proposes voluntary program for Colorado natural gas customers that would rely upon 99% carbon offsets


by Allen Best

Renewable natural gas is gas that has been derived from renewable sources. Think of methane from wastewater and sewage plants, or landfills, or even from dairies.

Carbon offsets are intended to compensate for the emission of carbon dioxide into the atmosphere as the result of industrial or other human activity, especially when quantified and traded as part of a commercial program.

Now consider the program being proposed by Blacks Hill Energy. The company wants to conduct a 4-year experiment beginning in 2023 that would allow its 194,000 customers, both residential and commercial, in Colorado to voluntarily reduce or offset the emissions they produce from combustion of natural gas for space and water heating.

The company’s Colorado customers are in 100 different communities, from Aspen and Telluride, to Rocky Ford and Yuma, Firestone, and Erie.

Customers would be charged an incremental cost of $5 for the company’s procurement of a “block” representing 20.5 therms. That’s about a quarter of the average residential customer’s monthly use. These purchases could be made on a monthly basis.

For each block the customer purchases, Black Hills will procure the carbon offsets or the environmental attributes of renewable natural gas. The average Black Hills customer would need to purchase four blocks a month, or spend $20 extra, to “absolve” them of their emissions.

Renewable natural gas is in relatively short supply. Almost everything we burn in our homes and businesses is methane mined from geologic deposits.

But there are a few projects. Grand Junction was first to begin harvesting the methane from its sewage. The most recent of Colorado’s four biogas projects was Boulder, in 2020. Methane from landfills at Erie and Fort Collins is also being harvested.

See 2020 story in Big Pivots, “Colorado’s fourth biogas project.”

Boulder biogass project

Boulder in 2020 completed conversion of its wastewater treatment plant to extract methane —the primary constituent of natural gas — to power trash trucks in Bouilder nad Broomfield. Top photo, cows feed at a dairy near Holyoke, in eastern Colorado.


Now, about carbon offsets. The Massachusetts Institute of Technology explains that in buying the certificates, a person or group can fund projects that reduce emissions somewhere else.

Common examples include reforestation, building renewable energy, and carbon-storing agricultural practices. A bill sponsored by Colorado State Sen. Chris Hansen, a Democrat from Denver, proposed to help laying the foundation for a market for carbon-storing agricultural practices, but the bill was a suitcase of big ideas and didn’t get across the finish line.

Biogas projects tapping the agriculture sector — think feedlots and diaries — have yet to emerge, although there seems to be interest in Weld and Morgan counties, perhaps elsewhere, too. There will be a market if the numbers come.

Matthew J. Christofferson, who manages the rate and regulatory filings of Black Hills, in a PUC filing testified that the program relies heavily on carbon offsets because of their lesser cost.

“Due to supply limitations, high production costs, and valuable incentives for RNG in transportation, RNG prices remain relatively high in the current market conditions,” he testified.

The program would consist of 99% carbon offsets and 1% renewable natural gas – but only the attributes.

Black Hills says this program was created after 57% of customers who responded to a survey indicated they are “somewhat” or “very” interested in participating in a program of this sort.

“A voluntary program caters to the wants and needs of those interested in participating while not forcing costs on those who are disinterested in the program,” said Christofferson.

In coming up with this program, Black Hills has worked with 3Degrees, a consultancy that has also worked with Pacific Power, Puget Sound Energy, and Georgia Power in implementing renewable energy programs.

Blacks Hills wants PUC approved by Nov. 30, citing the “volatility” of the markets for carbon offsets and RNG.

EPA chart of ag and landfill renewable natural gas

If Black Hills pitches this as a voluntary program, it also has a legal mandate imposed by SB21-264, a law adopted by Colorado in 2021. The law requires each of Colorado’s four gas distribution utilities — including Black Hills, the second largest —to file a clean heat plan with the Public Utilities Commission. Those plans must demonstrate how the utility will use clean heat resources to meet targets, 4% reductions by 2025 and 22% by 2030. These are compared to 2015 benchmarks.

The bill allows utilities a broad range of measures for achieving the goal including beneficial electrification, gas demand-side management programs, hydrogen and recovered methane from coal beds, as well as wastewater, solid waste, and pyrolysis.

Xcel Energy also plans to offer voluntary programs associated with natural gas use. “We are staring to pilot multiple options, including smart electric water heaters, all-electric new building developments and electric air-source heat pumps for cooling and heating combined with natural gas furnaces for backup heating,” the annual sustainability report says. The company reports also exploring the testing of both hydrogen production and hydrogen blending in its natural gas distribution system.

Allen Best
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