2023 State of the Industry: Moving molecules

Developments in the area of renewables could allow propane retailers to transport more than just conventional propane. (Photo: spacedrone808, VasilyevD (background), Opka (truck)/iStock / Getty Images Plus/Getty Images; lolon/DigitalVision Vectors/Getty Images (molecule))

The U.S. propane industry is on a path of renewable fuels innovation, toward a destination that balances the environmental benefits of decarbonization and fulfills the needs of a versatile customer base.

Some of the industry’s biggest players, including AmeriGas, Suburban Propane and SHV Energy/Pinnacle Propane, sit at the forefront, their decisions and partnerships helping to fuel the course for an industry working to strengthen its voice and presence in the national energy conversation. The net results so far: the development and production of renewable propane, dimethyl ether (DME) and renewable and recycled carbon dimethyl ether (rDME), with an increased curiosity about the industry’s future role with hydrogen.

Though the renewable fuels market continues to develop, with a bevy of company announcements and energy news headlines signaling such a transition is well underway, it remains in its infancy for propane. A small but growing segment of the U.S. propane industry has begun the journey toward renewables, from those simply wanting to learn more to those taking their first loads of the product.

The LP Gas 2023 State of the Industry report examines the progress made with renewables this year, the strategies of the industry’s largest companies and the impacts that the developing renewable fuels marketplace might have on the thousands of propane retailers fueling customers across the country with still-clean conventional propane.

As Gokul Vishwanathan of the Propane Education & Research Council (PERC) said during a propane industry panel discussion on renewables earlier this year: “It’s time for us to shine.”

Market potential

A 1-billion-gallon market. That’s just 10 percent of what some industry leaders believe is the total potential for renewable propane in the coming years.

That quantity also made for a noteworthy educational session title at this year’s Southeastern Convention & International Propane Expo in Nashville, Tennessee. Panelists from propane industry majors as well as GTI Energy and PERC discussed renewable fuels and the propane industry.

Panelists echoed an “all of the above” approach to renewable fuels production and use in the propane industry.

“We need everything, everywhere, all at once,” says Rebecca Groen, CEO of Futuria Fuels at SHV Energy.

Like traditional propane, renewable propane can come as a byproduct of other processes, such as renewable diesel and sustainable aviation fuel (SAF) production, and from a growing list of sustainable feedstocks like animal fats and vegetable oils.

The industry, though, can’t rely solely on renewable diesel and SAF, Groen says. The volumes are too small, and the LPG industry can’t easily influence the costs associated with these methods. So, it’s already in pursuit of other opportunities.

On-purpose pathways provide another future outlet for renewable propane production.

Illinois-based GTI Energy is developing its Cool LPG technology, which aims to convert biogas or bio-syngas into renewably sourced, green LPG, providing a drop-in renewable fuel for heating, cooking and transportation with a significantly lower carbon footprint than traditional LPG. GTI’s technical paper on the Cool LPG technology won an award for “Best Presentation” at the World LPG Forum’s Global Science Conference during November’s LPG Week in Rome. The company is working toward a first phase of demonstration plants.

Jeff Stewart, president of renewable propane adopter Blue Star Gas and a leader in the industry’s push to lower its carbon intensity, says current renewable propane production in the U.S. is minimal, at less than 30 million gallons a year. By the end of 2024, he says, the industry should see 125 million gallons in the marketplace.

“The most important thing for the industry is, with all of the infrastructure and equipment, nothing needs to change,” Vishwanathan says. “That’s the key about renewable propane.”

Major influencers

AmeriGas, Suburban Propane and SHV Energy/Pinnacle Propane are among the largest propane industry companies working in the renewable space and influencing the direction of the market.

AmeriGas has formed several partnerships aimed at renewable propane production, with California companies among them.

The industry’s largest propane retailer drew attention this year for its role as the exclusive buyer of renewable propane from Global Clean Energy’s biorefinery in Bakersfield, California. Global Clean Energy produces renewable propane and other products from camelina sativa, a fast-growing, nonfood rotation crop that produces small, oily seeds ideal for renewable fuel production. The partnership looks to bring 13 million gallons of renewable propane to the California market.

In addition, AmeriGas’ parent company, UGI, is working with California-based technology developer Vertimass to convert alcohols to hydrocarbon fuels and allow for on-purpose LPG production.

In the past several years, Suburban Propane, the nation’s third-largest propane retailer, has grown its renewable fuels portfolio with a focus on three segments: traditional propane, renewable propane and rDME; hydrogen; and biogas. This has allowed it to get into the renewable natural gas (RNG) business.

“There’s interplay between each of the pieces, which allows us to optimize where the greatest opportunity exists at the time,” says Doug Dagan, vice president of strategic initiatives – renewable energy at Suburban. “These market segments are developing on their own time frame and independently, and also with other incentives, and those incentives are in flux.”

Dagan underscores the importance of the propane industry having a low-carbon-fuel-compliant product that can meet regulatory standards and generate credits for monetary benefits.

Suburban also owns a stake in California-based Oberon Fuels, a producer of DME and rDME from multiple waste or renewable resources. Because DME, with six hydrogen atoms in each molecule, has similar properties to propane, it can be blended with the fuel as well as stored and transported using existing propane infrastructure. The close DME/propane relationship could allow the propane industry to become a carrier of the hydrogen-rich DME molecule and one day reap additional business opportunities.

Another DME producer is increasing its presence in the U.S. propane industry. A joint venture in 2022 between SHV Energy and UGI International led to the formation of Dimeta, a Netherlands-based producer of rDME, which is exploring plant development on the Gulf Coast.

Enough to go around?

With the largest companies working to develop the renewable fuels market, the question becomes: What’s left for the other propane retailers that comprise most of the U.S. industry?

LP Gas sources say renewable propane is already being marketed in about 20 states across the country.

“We are working very hard to get more renewable propane and renewable fuels into the marketplace,” says Stewart, who chairs a renewable fuels committee at the National Propane Gas Association.

The Dimeta joint venture was formed with the principle that it would make 20 percent of the DME volumes produced available to other companies “so we can really encourage acceptance,” according to Groen.

“We really want the industry to survive because together we’re so much stronger,” she says. “That’s really an important pillar of setting up Dimeta.

“We’re not quite there with renewable propane production, but when we are, I think we’ll do the same.”

Propane retailers seeking to pursue renewable fuel opportunities have easy access to resources through NPGA and PERC’s own interest and involvement in the developing marketplace.

Other new propane industry ventures feature familiar leaders and companies. For example, Tom Jaenicke of Warm Thoughts Communications leads the Renewable Propane Alliance, which includes several state propane associations. And rLPG North America is a consortium of companies, formed in December 2022, composed of Blossman Gas, Blue Star Gas, Cavagna North America, NGL Supply Terminals and Paraco Gas.

“The more we can encourage innovation, whether that’s through joint ventures, minority investment, seed funding or capital, we want to do that,” Dagan says. “So, when the world catches up to being the green, environmental, renewable future, we’re prepared not only with low-carbon liquid fuels but also with hydrogen, biogas and RNG.”

Education and advocacy

Propane industry leaders say education and advocacy at the state and national levels are key elements of building a renewable fuels market. The Propane Gas Association of New England formed a renewable propane standing committee, which drew 90 interested attendees to its first meeting, reports president and CEO Leslie Anderson. The National Propane Gas Association also introduced a renewable fuels committee, composed of more than 90 members, to educate membership and lead the industry toward renewable fuel opportunities. It features four subcommittees: federal legislative, federal regulatory, codes and standards, and state advocacy. “We have a very powerful story, and we have to tell it,” says Jeff Stewart of Blue Star Gas, chair of the committee who calls it “ground zero for creating base knowledge.” PERC also held a renewable summit to facilitate a working relationship between NPGA and PERC staff, marketers and producers of renewable propane.

What propane retailers are saying

Can you tell us about your involvement with renewable propane? For example: Are you selling it now, are you interested in selling it or do you have no interest in pursuing it?

“We are not at the moment, but we try to follow everything in the industry to not only help us grow but help the propane community as a whole.” – Texas retailer

“We are not currently selling renewable propane, but we would entertain it.” – Mississippi retailer

“We aren’t selling renewable propane but would love to look into it.” – Colorado retailer

What DME authorities are saying

“While the propane industry identifies itself based on one molecule, we think the industry – with its knowledge, extensive infrastructure and workforce – can leverage its ability to move molecules safely and efficiently. The propane industry is ready and capable of moving other molecules such as renewable DME. By broadening its self-perception, the propane industry could generate revenue from propane, renewable propane, renewable DME and hydrogen, primarily using existing infrastructure.”
– Rebecca Boudreaux, CEO, Oberon Fuels

“Propane is a critical energy source and will continue to play a vital role over the coming years. We genuinely believe that DME, alongside renewable propane, can support the longevity of the propane molecule for many decades – albeit being made from more sustainable sources in the future. Drop-in propane and DME blends mean we can continue to retain propane infrastructure, and 100 percent DME can also bring opportunities for the sector.”
– Sophia Haywood, head of advocacy and communications, Dimeta

State of the Industry report brought to you by: Matrix Capital Markets Group