Many natural gas utilities are currently developing strategic plans to reduce their greenhouse gas emissions, or realize they will be asked to do so soon. Integrating renewable natural gas (RNG) is an important component of every utility's plan to decarbonize, and many are considering whether to offer RNG as a voluntary, premium product to customers. We've traveled the country and engaged in conversations with key stakeholders from numerous gas utilities over the past year and, understandably, they are grappling with some significant strategic questions:
- How do we know a voluntary RNG program is the right approach as we think about decarbonization?
- It's very early in the conversation and the landscape is quickly evolving. Would we be better suited to sit on the sidelines for a bit and wait to see how this pans out before making a decision about a voluntary RNG program?
While voluntary programs are not a substitute for a comprehensive approach to decarbonization, they can play an important role for any utility looking to lead. And, while the above questions are completely valid, our perspective is this: well-designed and implemented voluntary programs offer many benefits to gas utilities and can be a "no regrets" investment, even if the utilities' broader decarbonization strategies are not fully cemented yet. Here are a few reasons why...
Address Customer Needs and Drive Increased Satisfaction
For utilities that are beginning to hear from their customers about a desire for lower-carbon options, a voluntary program will make sense whether or not mandates for RNG are on the horizon. This is a lesson learned from the voluntary green power market – voluntary customers want to be leaders and mandated percentages of cleaner fuels will not be enough to keep leaders happy. For example, a municipal or corporate customer that has a set goal to be carbon neutral by 2040 is going to want to decarbonize a large percentage (even 100%) of its natural gas supply quickly, not be told there is a 5% mandate for RNG by 2030. In this way, voluntary programs complement mandates – they allow leaders to lead, and the rest of the customer base pays only for smaller, mandated volumes.
In addition, a voluntary RNG program can meet the needs of a utility's residential customers. These programs provide residential customers with choice, which they value, and the data shows that when these customers are offered options, their CSAT scores jump. Thanks to successful green power programs on the electric side, we can be confident that there is a residential market for premium, green products from a gas utility.
Build a Platform for Learning and Development
Customers who participate in utility voluntary renewable programs are willing to pay a premium to move the market forward. At first, that may mean that the voluntary program enables the utility to gain operational experience procuring or developing RNG supply. As the program grows, it could also provide an additional vehicle to fund the development of new local projects, or to support not-yet-mature technologies with pilot funding.
Exhibit Environmental Leadership
Given the broad range of options for gas utilities considering a decarbonization strategy, developing and launching a voluntary RNG program is fairly proactive. These utilities have the opportunity to help frame the nascent conversation about the role of gas with respect to decarbonization; additionally, talking about an alternative to fossil-based gas naturally leads to broader conversations with customers, stakeholders, and commissioners. A voluntary program broadens a utility's overall decarbonization strategy, which is likely to include efficiency, pipeline upgrades, and possibly rate-based RNG over time.
Is a voluntary RNG program the be-all-end-all solution for gas utilities as they tackle decarbonization? Likely not. But for forward-thinking utilities, there isn't going to be a single approach or solution, and a voluntary program can play an important, strategic role in a gas utility's comprehensive decarbonization plan.