Rapid City, SD-based Black Hills Corp. sees renewable natural gas (RNG) as an eventual sustainable driver for continued earnings and customer growth throughout its eight states of utility operations, CEO Linn Evans said earlier this month.
Black Hills is “working pretty aggressively” on RNG, Evans told analysts during the second quarter 2021 earnings call. There are four projects in place, from which the holding company is learning a lot. Six to 10 other projects are being negotiated, along with “a fairly long backlog of possibilities.”
In the recent past, the utility holding company has been working to ensure that pipelines can be built to the RNG production sources, he said. “We have literally thousands and thousands of miles of pipe crossing our primarily agricultural oriented economies with lots of potential customers.”
Black Hills is “still learning,” and RNG is still “relatively expensive,” depending on what types of solutions are being sought — economic or environmental. “Over time, because we are primarily looking for emissions reduction solutions, the economics will begin to make more sense. Prices should begin to come down as we get smarter.”
Black Hills is still in the early stages, but Evans said a team is examining all the ramifications of RNG carefully. “Our RNG involvement so far is modest, but it represents an interesting, sustainable and long-term opportunity for us.”
Meanwhile, the gas utilities have set a 50% reduction goal for greenhouse gas (GHG) emissions by 2035. The electric utilities have set a 70% reduction goal by 2040. Black Hills also may convert a coal-fired generation plant to natural gas by 2025.
“We are voluntarily committed to having our gas utilities reduce methane emissions,” Evans said. He noted the company participates in goals with the U.S. Environmental Protection Agency.
In Wyoming, Black Hills is researching ways to blend hydrogen with natural gas for use in electric generation plants. New utility integrated resource plans also are under review by regulators in Wyoming and South Dakota, Evans said.
Pandemic-driven annual population growth rates have doubled as have electric and natural gas utility load growth, which is now about 1.6%/year, according to management. Black Hills plans to budget a total of $3 billion in capital expenditures through 2025.
Net income was $25.2 million (40 cents/share) in 2Q2021, compared with $21 million (33 cents) for the same period last year.
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