Amazon’s newly announced (NASDAQ: AMZN) agreement with Clean Energy Fuels (NASDAQ: CLNE) to provide renewable natural gas (RNG) raises many questions.
The big one: Is Amazon getting into the RNG business?
Amazon will be fueling some of its vehicle fleet with Clean Energy’s low- and negative-carbon RNG. Perhaps most interesting is that Amazon could end up owning 19.99% of Clean Energy’s common stock on a fully diluted basis.
In an 8-K filing with the Securities and Exchange Commission, Clean Energy disclosed a stock warrant issued to Amazon for the purchase of up to 53,141,755 shares of common stock with a par value of $0.0001 per share.
The first tranche of 13,283,445 warrant shares will be vested as the fuel agreement is executed. The following portions, which could reach a total value up to $500 million, will vest over time according to discretionary fuel purchases by Amazon and its affiliates.
Clean Energy expects to spend between $45 million and $60 million by the end of 2021 on fueling stations to support Amazon’s RNG demands.
The capital expenditures will give Amazon access to RNG at 27 Clean Energy fueling stations across 15 states and 19 non-exclusive new or upgraded Clean Energy stations that it expects to construct by the end of the year.
This would build on Clean Energy’s network of 550 existing natural gas (NG) fueling stations in 42 states. Sahar Kamali, director of sustainability at Clean Energy, told FreightWaves this is the “natural gas highway” because NG vehicles can fuel up on any major route across the U.S.
“If the world is really going to tackle the issue of climate change, all of us need to find solutions that work both environmentally and economically, and that is exactly what this agreement supports,” Andrew Littlefair, CEO and president of Clean Energy, noted in the release.
An Amazon spokesperson told FreightWaves, “Amazon is excited about introducing new sustainable solutions for freight transportation, including renewable natural gas, electric and other sustainable technologies.”
Why RNG?
The technology, the emissions savings and the fueling infrastructure are available now. There’s no need to wait for better, cheaper batteries or an electric or hydrogen fueling infrastructure, Kamali noted.
Biogas from landfills, dairy farms and wastewater treatment plants that would otherwise be released into the atmosphere is collected and processed to create RNG, according to the Environmental Protection Agency (EPA).
RNG sourced from landfills can reduce GHG emissions 50% to 70% compared to diesel, and sourcing RNG from dairy farms provides an even bigger emissions benefit, Kamali said.
NG vehicles overall burn 90% cleaner than the EPA’s NOx standard, and fueling vehicles with RNG can reduce GHG emissions by up to 382% depending on the source, according to Natural Gas Vehicles for America (NGVA), an organization that advocates for greater use of vehicles powered by compressed natural gas and liquefied natural gas.
RNG can be transported easily via NG pipelines to one of the nearly 900 NG stations across North America.
“We can make RNG competitive, if not a better price than diesel,” Kamali said in response to questions about RNG’s cost-effectiveness. NG is also not subject to volatile fuel markets because it is produced domestically, and there is an ample supply.
Use of RNG as a transportation fuel increased 291% from 2015 to 2019, displacing nearly 7.5 million tons of CO2, according to NGVA.
Kamali said, based on waste streams and studies, it could be possible to displace heavy-duty fuel usage with the estimated 3 billion to 30 billion gallons of potential RNG production available.
“There are just as many RNG-capturing facilities in development right now as there already are in existence,” Thomas Healy, CEO at compressed natural gas and electric hybrid powertrain provider Hyliion, told FreightWaves.
The big picture
Clean Energy aims to provide customers with 100% zero-carbon RNG by 2025. Amazon has a goal to reach net-zero carbon emissions by 2040.
This agreement could help Clean Energy bolster its RNG offerings and customer base while giving Amazon the opportunity to lower transportation-related emissions by using RNG and potentially become a partial owner of a renewable energy business.
Along with this RNG agreement, Amazon is soon expecting deliveries on 100,000 electric vans ordered from Rivian. Amazon is diversifying its investments in electric vehicles, solar power, wind farms and RNG to reach its 2025 goal of 100% renewable energy.
With 2.5 gigawatts of renewable energy capacity in Europe and 8.5 gigawatts of capacity in the world, Amazon touts itself as the “largest corporate buyer of renewable energy globally.”
Click here for more FreightWaves articles by Alyssa Sporrer.
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