28 August 2022 |

Anaerobic acquisition


For this deal in focus, we’re taking a step backwards in time. It’s a deal that I missed last month, as part of which Blackrock, one of the largest financial institutions in the world, bought Vanguard Renewables, which operates anaerobic digestion facilities in the Northeastern U.S., for $700M.

What is anaerobic digestion? It refers to the process by which bacteria break down waste in the absence of oxygen (hence anaerobic). The absence of oxygen is important here. Similar to pyrolysis, the process that produces biochar from biomass, which is also conducted absent oxygen, removing oxygen prevents the production of emissions in the process. The result? A ‘renewable’ biogas.

In Vanguard Renewables’ case, they scale anaerobic digestion in giant reactors, where various types of waste can be processed and turned into biogas. At the time of the acquisition, they operated six anaerobic digesters across Massachusetts and Vermont. Their goal? Operate 100 digesters by 2026. To-date, facilities have been co-located with farms to source waste.

One of Vanguard Renewables’ digesters in Vermont

Anaerobic digestion is more common in Europe, but may be ramping up in the U.S. Producing gas renewably can have a lot of benefits. Burning it, just like burning natural gas or methane, still produces CO2 emissions. Ideally however, the CO2 emissions produced from burning it result in no net gain in atmospheric CO2. How? Because the emissions released in burning were ‘locked in’ to the gas from waste. And those same emissions theoretically would have reentered the carbon cycle had the waste not been processed. 

Whether that’s 100% true depends to a large degree on how air-tight the full chain from waste to renewable gas consumption is – even small leaks along the supply chain, for instance, could ‘upset’ the emissions neutrality of the system considerably. That said, there are definitely benefits to processing waste, especially from farms, rather than letting it decompose in the field or in landfills. When organic matter decomposes without any additional processing through a process called anaerobic fermentation (often in landfills) it can lead to significant methane emissions.

The net-net

Having spent a lot of time in Germany in my life, biogas is more or less ubiquitous in Europe. Even just driving around the country, or around town, you’ll see mentions of it. I never really processed that I didn’t see much mention of it at all in the U.S. But perhaps that’s changing – there’s nothing like a Blackrock-managed acquisition to signal that a technology is firmly on investors and innovators radars.