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Vision Ridge invests $100m to ‘change the carbon profile of natural gas’

The private funds manager recently closed its third sustainable assets fund on $1.25bn after four months in market.

Vision Ridge Partners, a private funds manager investing in sustainable infrastructure, has committed $100 million to build out a company that is installing biogas collection systems at landfill sites to create organically produced natural gas.

The US-based firm has partnered with a team of natural gas producers, led by 35-year industry veteran Bill Johnson, previously chief executive of ShalePro Energy Services, to establish Vision RNG. The platform company will use Vision Ridge’s investment to develop biogas infrastructure that captures methane emitted from decomposing organic waste in landfills to convert into a cleaner form of natural gas.

Known in the energy sector as renewable natural gas, biogas, which is primarily comprised of methane, is collected by a pipeline system underneath landfill sites and processed to remove associated CO2 and thereby make “a pipeline-quality gas that is fully interchangeable with conventional natural gas,” according to the US’s Department of Energy.

Global natural gas demand is projected to steadily increase over the coming decade alongside growing energy needs around the world. When conventionally drilled, natural gas is a cleaner fossil fuel than oil and coal and is found in abundance across global markets. It has been billed by participants in the energy sector as a bridge fuel source while cleaner options such as solar, wind and batteries continue to be developed.

“It’s increasingly clear that, even if natural gas is a bridge fuel, it needs to reduce its carbon intensity,” Reuben Munger, Vision Ridge’s founder and managing partner, told New Private Markets. “Renewable natural gas is the pathway to really changing the carbon profile of natural gas.”

Munger founded Vision Ridge in 2008 to invest in “financial opportunities presented by sustainable solutions,” according to the firm’s website. Vision Ridge has raised three funds to date, most recently closing Sustainable Asset Fund III on $1.25 billion after four months in the market.

Fund I raised $430 million and received anchor commitments from Capricorn Investment Group and the Grantham Foundation for the Protection of the Environment. The investment to launch Vision RNG was one of the last deals from the firm’s $670 million Fund II.

Vision Ridge made its first biogas investment in 2015 when it partnered with the developer Vanguard Renewables to manage a portfolio of projects that process gas from manure emissions. This week, Vanguard announced a deal with Enbridge to supply the Canadian pipeline operator with 2 billion cubic feet of biogas annually.

With a strategy to commit between $75 million and $175 million per deal, Vision Ridge is targeting a smaller corner of the biogas market that has been overlooked because the costs of collection and processing systems were too expensive.

“Historically, for smaller landfills, it’s been hard to invest in some of the pieces that are required to optimise the cost of methane capture,” Munger said. “We saw some technologies that could better address bringing landfill gas methane into the RNG market.”

The environmental case for biogas is two-fold, according to Munger. First, capturing gas from landfills prevents unprocessed methane and CO2 from escaping, and processing it removes CO2 before it is burned. “The emission at burning is the same regarding input, but it’s relative to what would otherwise be emitted into the air,” he said.

Another benefit, Munger added, is the impact capturing biogas has on the air quality of communities near landfills: “This is a significant area and an important step to start to change the carbon profile of the gas side of our infrastructure.”