Clean Energy Fuels (CLNE), which provides natural gas to fleets that run on alternative fuels, also sources biogas from landfills and livestock and converts it into renewable natural gas (RNG) which is interchangeable with conventional natural gas. Clean Energy says although landfill gas (LFG) accounts for most of the growth in its biogas projects, biogas from dairy and other livestock farm waste are significant untapped opportunities for RNG production.

In its 2020 10-K, Clean Energy includes new language that reveals why livestock RNG projects remain largely untapped:

“Livestock waste and dairy farm projects produce significantly less RNG than landfill facilities.”

The projects are largely uneconomical without the environmental credits, which are generated when companies like Clean Energy sell alternative fuels to third parties that make transportation fuel and must meet federal and state renewable fuel and emissions requirements. The credits may be sold to companies trying to offset their carbon emissions.

Even with the sale of credits, Clean Energy now acknowledges farm waste to energy projects are unlikely to be profitable:

“...these projects are even more dependent on the LCFS credits and, to a lesser extent, RINs for commercial viability. If CARB reduces the CI score that it applies to waste conversion projects, such as dairy digesters, the number of LCFS credits for RNG generated at livestock waste and dairy farm projects will decline.”

The number of credits generated, though vital, is not the only factor affecting how much money is made selling credits. The revenue generated from credits is volatile and prone to violent fluctuations, making livestock RNG projects even riskier. In 2020, the market prices for certain credits (RINs) ranged from $2.13 to $0.80.

“Fluctuations in the price of LCFS credits or the number of LCFS credits assigned will have a significantly greater effect on the success of livestock waste and dairy farm projects. A significant decline in the value of LCFS credits adversely affect our business, financial condition, and results of operations.”

Clean Energy touts RNG as “the next big thing”. The company’s share price— up more than 1,000% over the past year— is being fueled, in part, by the farm waste-to-renewable energy narrative. In its 2019 annual report, Clean Energy does not use the words “livestock, farm, or dairy.” But in the 2020 annual report, Clean Energy mentions “livestock” 18 times, “farm” 10 times, and “dairy” 13 times.

In 2021, Clean Energy expects to invest approximately $100 million to develop dairy RNG production projects and up to approximately $75.0 million for fueling stations that will support long-term contracted RNG fueling volume. The company warns doing so will require a significant capital raise in 2021. Investors counting on cow dung to propel Clean Energy shares higher may soon regret not converting their shares into capital gains.