At Energy Capital Ventures®, we believe natural gas is a foundational part of a resilient, reliable, and affordable energy system. Rather than being sidelined in the energy transition, gas infrastructure can be enhanced and modernized to play a central role in delivering cleaner, more flexible energy solutions. One of the most promising opportunities lies in tapping into waste methane—from landfills, wastewater treatment plants, and oilfield flares—to create new, low-carbon fuel streams such as renewable natural gas (RNG), hydrogen, and methanol.

This opportunity exemplifies our Green Molecules™ thesis: empowering utilities and innovators to deploy cleaner molecules through existing infrastructure, expanding access to low-carbon fuels, and supporting a diversified and future-proof energy portfolio. Waste methane, once captured and upgraded, can be a key contributor to a cleaner, more efficient gas network.

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Why Methane Waste Matters

Methane is energy-dense and widely emitted across waste and industrial systems. In the U.S. alone, municipal solid waste landfills emitted approximately 3.7 million metric tons of methane in 2022, according to the EPA, while wastewater treatment plants accounted for an additional 1.8 million metric tons. Oil and gas production adds another large volume through venting and flaring.

Historically, capturing and utilizing this gas was limited to a small number of large landfills or wastewater plants. But recent advances have changed the economics. The rise of modular technologies, new business models, and strong policy incentives—including California's Low Carbon Fuel Standard (LCFS), the federal Renewable Fuel Standard (RFS), and the Inflation Reduction Act (IRA)—have made it increasingly viable to turn previously stranded sources of methane into useful, low-carbon fuels.

Three key forces are converging to make methane recovery more attractive than ever:

• Technology Readiness: Capture, upgrading, and conversion systems have become smaller, cheaper, and more efficient.
• Policy Support: Federal and state programs offer credits, grants, and tax incentives that significantly improve project returns.
• Market Demand: Utilities and fuel users are increasingly sourcing verified low-carbon fuels to meet internal targets or regulatory mandates.

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Pathways for Capture and Conversion

Landfills and Wastewater Treatment: Modern landfill gas collection systems extract biogas from a network of wells and piping installed throughout the landfill. Anaerobic digesters, used at wastewater plants and farms, convert organic waste into biogas via microbial breakdown. Over 1,200 wastewater facilities in the U.S. use anaerobic digestion, and hundreds more landfills have the potential to host LFG recovery systems. Co-digestion of food and agricultural waste is further increasing the volume and quality of biogas that can be recovered.

Flare Gas Recovery: Methane is also lost through flaring at oil and gas production sites. The World Bank estimates that roughly 140 billion cubic meters of natural gas are flared globally each year. Innovations such as mobile compression units, portable gas-to-liquids (GTL) systems, and on-site methanol or hydrogen production allow producers to capture and monetize this gas instead of burning it. These technologies are especially relevant for remote or off-grid operations.

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Innovations in Upgrading and Conversion

Once methane is captured, it must be refined or transformed into usable energy products. This is where much of the innovation is happening, and where Energy Capital Ventures® sees some of the most exciting opportunities for early-stage investment.

• Biogas Upgrading to RNG:
  • Membrane Separation: These systems are now modular and factory-built, often containerized, making them suitable for distributed projects. Recent advancements in multi-stage membranes have improved methane recovery and reduced energy consumption. ECV portfolio company Osmoses is pioneering high-performance membrane technologies that enable dramatic improvements in the cost of gas separations. Osmoses membranes can purify mixed gas streams, for such as natural gas and CO2 both for process gas and RNG applications, rendering usable an otherwise waste product.
  • Pressure Swing Adsorption (PSA): Ideal for medium-scale systems, PSA units are increasingly paired with sensors and remote monitoring to optimize performance. CarbonQuest, another ECV portfolio company, leverages PSA in its building-level carbon capture systems—showcasing how this technology can be modularized and deployed across various emissions-intensive sectors.
  • Amine Scrubbing: While more capital-intensive, amine systems can now be integrated with CO2 capture and liquefaction units, creating additional value streams for larger projects.
  • One of our portfolio companies, Vertus Energy, is advancing innovation in biogas with their high-efficiency bioreactor technology that optimizes the conversion of biogas into high-purity biomethane. This enables faster, more cost-effective deployment of distributed waste-to-fuel systems—an approach that aligns directly with the Green Molecules™ thesis.
• Methane Reforming to Hydrogen:
  • Steam Methane Reforming (SMR): When applied to biogenic methane and paired with CO2 capture, SMR can produce clean hydrogen with a lifecycle carbon intensity well below 45V thresholds under the IRA.
  • Methane Pyrolysis: One of the most compelling emerging pathways, pyrolysis uses plasma or high-temperature reactors to split CH4 into hydrogen and solid carbon, enabling CO2-free hydrogen production. The solid carbon byproduct can be stored or used in industrial applications.
  • Autothermal Reforming (ATR): More compact and efficient at high pressure than SMR, ATR systems are gaining traction in modular designs for distributed hydrogen generation.
• Chemical Conversion to Liquids:
  • Methanol Synthesis: Small-scale methanol reactors are being deployed to convert flare gas into a storable and transportable liquid. These systems are especially relevant in oilfields and industrial settings.
  • Compact GTL Systems: Fischer-Tropsch-based mini-refineries are enabling the local production of synthetic fuels from waste methane. Innovations in catalyst design and heat integration have drastically reduced their size and cost.
  • Biological Conversion: Early-stage technologies are using engineered microbes or enzymes to convert methane into higher-value products like protein or bioplastics. These are still in development but show potential for niche applications.

Across all these technologies, the trend is clear: methane-to-fuel systems are becoming more compact, cost-effective, and flexible. This modularity opens the door to distributed deployment models that can address previously uneconomic sites, aligning well with utility networks and localized infrastructure.

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Deployment Models and Project Economics

While technical innovation drives feasibility, the real-world scalability of methane-to-fuel technologies depends on project economics and deployment strategies. The industry is seeing a shift toward flexible, modular systems that reduce upfront costs and enable distributed deployment.

• Modular vs. Centralized Deployment: Modular systems—such as containerized digesters, upgrading skids, and compact reformers—allow smaller landfills, farms, and wastewater plants to participate in RNG and hydrogen production. For instance, a typical modular biogas upgrading unit can process 150–500 standard cubic feet per minute (scfm) of biogas, serving sites previously too small for traditional upgrading. In contrast, large centralized projects (like those at major landfills or urban wastewater plants) benefit from economies of scale and can justify investment in more capital-intensive infrastructure.
• Capex & Payback: Biogas-to-RNG projects typically range from $3–$10 million for mid-sized systems, with a payback period of 4–7 years depending on scale, gas yield, and market incentives. For example, the South San Francisco Scavenger Company’s RNG facility processes 300 scfm of landfill gas and cost $11.5M, funded in part by California Energy Commission grants and LCFS credits.
• Revenue Streams: Projects are monetized through a mix of:
  • RNG or hydrogen sales (indexed to gas or transport fuel prices)
  • Environmental credits (RINs under the Renewable Fuel Standard, LCFS credits, 45Q and 45V tax incentives)
  • Electricity sales (in combined heat and power or microgrid applications)
  • Voluntary carbon offsets for carbon-negative fuels
  In California, LCFS credits averaged $76 per metric ton in 2023, and RIN prices under the RFS ranged between $1.30–$2.00 per D3 RIN, creating strong incentives for RNG deployment.
• Interconnection & Permitting: Pipeline interconnection remains one of the more complex and costly elements of RNG projects. Utilities are increasingly playing a critical role in streamlining access to local networks. States like Oregon and Colorado have adopted RNG interconnection rules and cost-recovery mechanisms to support wider participation by smaller developers.
• Risk Factors: Key barriers include feedstock variability, gas quality issues, evolving credit markets, and permitting delays. However, insurance products and offtake contracts are emerging to help mitigate revenue and regulatory risks.

As the sector matures, new financing structures are emerging—from project finance to utility-led joint ventures. These models are making it easier to deploy methane-to-fuel projects across the country, even in non-traditional locations.

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Outlook and Emerging Trends

The long-term outlook for methane-to-fuel technologies is promising, but not without complexity. While advancements in modular systems, reforming pathways, and biogas upgrading have accelerated adoption, the policy landscape remains mixed. Incentives such as IRA tax credits and state-level LCFS programs have played a meaningful role, but uncertainty around implementation timelines, credit valuation, and political durability continue to present challenges for long-term planning.

That said, real progress is being made. According to the EPA's Landfill Methane Outreach Program (LMOP), over 540 LFG-to-energy projects are already operational in the U.S., with hundreds more landfills identified as viable candidates. Wastewater and agricultural methane projects are being supported through DOE and USDA grants, while new digital tools for methane detection and verification are helping unlock additional markets such as voluntary carbon offsets and green gas certification.

As more modular, distributed, and financeable solutions hit the market, we expect continued experimentation with business models—from behind-the-meter fuel production to third-party owned and utility-interconnected micro-facilities. While the path ahead won’t be without friction, the core thesis is clear: turning waste methane into value is increasingly viable and increasingly needed.

At Energy Capital Ventures®, we continue to invest in technologies and teams driving this transition. Capturing methane waste and turning it into fuel is a tangible, infrastructure-ready strategy that enhances the performance and value of the gas system. It is a critical building block in the next era of utility innovation—and a core piece of the Green Molecules™ transformation we are proud to support.