Biogas Energy: Paving the way for Circularity and Decarbonization

Anecdotal reference suggests that biogas energy dates to 900 BC when the Assyrians (former empire that extended through the territories that today conform the countries of?Syria, Lebanon, Turkey, Iraq and Iran) used biogas to heat their bathwater. Fast forward to the 1600s, the discovery that flammable gasses could be produced from organic waste helped shape our knowledge of the anaerobic digestion (AD) process as it is today. AD is?the process of breaking down organic matter by microbial action in the absence of air, to produce a gas with a high methane content. This methane can be captured and burned to produce heat, electricity or a combination of the two. Farm-based facilities were and continue to be the most common places for use and testing of AD technology. In modern times, low-technology digesters have been used for the past c.30 years to provide biogas for domestic cooking and lighting fuels with varying degrees of success. Improvement in AD technology and the ability to digest different types of organic matter such as straw from agricultural waste, which is abundant and low cost, coupled with the ability to scale up production, have been the two common barriers for biogas to become a mainstream source of clean energy, until recently.

Policy support has surged strongly in the last two years due to a combination of factors. Energy security concerns and energy crisis caused by the Russia/Ukraine conflict: biogas is regarded as a domestic energy source that can reduce dependency on natural gas imports and support energy security in many countries. The other factor being the urgent need to decarbonize society to limit global temperature rise to 1.5°C, countries have begun to view biogas as a ready-to-use technology that can help accelerate decarbonization in the short term, and they are therefore developing specific policies that include biogas as a key component in their energy transition strategies.

Circularity. Apart from being a clean domestic energy source, biogases (biogas and biomethane) provide other benefits. For instance, biomethane can be used to decarbonize hard-to-electrify sectors such as transport and industry. Both biogas and biomethane use reduces not only CO2?emissions from fossil fuel combustion but also, when correctly managed, methane emissions from the waste and agriculture/livestock sectors (responsible for 60% of anthropogenic global methane emissions). This advantage aligns well with the emissions reduction objectives of the Global Methane Pledge launched in 2021 and signed by 155 countries. Using biogas and biomethane helps build a circular economy around residue and waste valorization, contributing to rural economic development. Plus, producing natural fertilizers as a coproduct of biogas and biomethane production can augment farmers’ income and help re?establish soil health by eliminating certain environmental impacts related to untreated manure use. Utilizing organic municipal and industrial waste as feedstock for biomethane production not only contributes to lowering emissions, but also to responsible waste management, and creating a source of additional value creation.

Biomethane is highly versatile. It can be used to generate heat and power, upgraded and compressed as CNG or BNG or liquefied biofuel as BioLNG. It can also be used as feedstock and blended to produce other biofuels. Biogas has an essential part to play in Power-to-X, which involves electricity conversion, energy storage, and reconversion pathways from surplus renewable energy. Green fuels can be created by combining CO2 from biogas facilities and hydrogen from green electricity further extracting clean energy from biogas facilities.

Biogas Outlook and Regulatory Frameworks. In China, since 2019 the government has been steering a biogas industry transition, investing in large-scale (>10 mcm/year) bio-natural gas (BNG, biomethane) projects. These plants would use rural and urban waste feedstocks in an integrated manner to produce electricity and gas to inject into the grid. China has an ambitious national target of 20 billion cubic meters?(bcm) by 2030. India has considerable small-scale household biogas production in rural areas lacking grid access, with biogas being an important energy source for clean cooking and lighting. The government however has set ambitious targets for several biogas end uses, including transport, with extensive policy development to support them: the Sustainable Alternative Towards Affordable Transportation (SATAT) scheme for transport and industrial fuel; the 2022 Waste to Energy Program to finance the recovery of urban, industrial and agricultural waste; and the 2022 National Biogas Program for rural and semi-urban areas. The deployment of industrial-scale production facilities is slow though. In Q4 2023, the SATAT programme only had 48 plants commissioned of the 5000 new plants it had targeted for 2024. Ongoing challenges in India are the establishment of supply chains to mobilize agricultural residue, animal manure and organic municipal waste collection as well as completion of the necessary gas infrastructure improvements, all of which create forecast uncertainties.

In the United States, biomethane development has historically been driven by the transport sector and support schemes such as the Renewable Fuel Standard (RFS) and California’s Low Carbon Fuels Standard (LCFS). The US has also further accelerated growth of biomethane in recent years, prompted by new federal and state-level policy support, including the Inflation Reduction Act (IRA). It is expected US demand for biogas will grow to c. 300 bcm by 2030. In Canada, renewable natural gas (RNG) or biomethane production began in 2003 when the Trans Quebec & Maritimes (TQM) pipeline started receiving RNG captured from a landfill in Quebec. Currently, the RNG on TWM is mainly destined for export to the US, however there are many projects across Canada posed to deliver RNG to natural gas distribution networks for local markets. Thanks to policy changes and provincial mandates, the number of projects operating in Canada are expected to more than double by 2025.

Europe presents the most mature biomethane industry with fast paced growing markets. Electricity generation and supply to the grid has been the main driver for biogas expansion for the last two decades, and recent policies have further promoted diversification of biogas uses. In Germany, transport is the end use that provides the highest revenue for biomethane producers who benefit from clean-fuel certificates for renewable fuel quotas. It is also a strong growth driver in countries that already have gas vehicle fleets and filling stations infrastructure. The European Union has initiated the inclusion of biogas and biomethane in its Guarantee of Origin system that industry can use to comply with the EU Emissions Trading Scheme (ETS) or private companies can utilise to achieve their own emissions reduction targets. The Renewable Energy Directive (RED) II regulates biogas Guarantees of Origin. Some countries are already keeping count with national registries and bilateral agreements that enable cross-border biomethane trading (Denmark, Germany, the Netherlands, Austria, Switzerland, the UK and France). Further deployment of this mechanism in other counties will help increase international trade, through either physical gas exchanges or certificate trading. In 2022, the RePower EU plan set a target of 35 bcm of biomethane by 2030 to help accelerate investment and growth in the sector. Whilst the above countries already have high shares of biomethane in their grids (Denmark achieved a remarkable 38% in Q4 2023), others are at earlier development stages (Belgium, Spain, Poland) and expected to catch up in coming years.

Notable investments in the Biogas sector. Thanks to the advent of improved and differentiated technologies that enable more efficient AD and biomethane production, the ability to build more robust supply chains to secure upstream supply of feedstock from organic agricultural, municipal and industrial waste, and the supporting regulatory frameworks across the world -all of which can enable biogas production at scale- bp and 壳牌 completed in 2023 the two largest acquisitions in the biogas sector and the largest to-date in terms of investment in renewables and low carbon solutions. BP, with the acquisition of Archaea Energy for US$4bln bp completes acquisition of Archaea Energy | News and insights | Home, and Shell, with the acquisition of Nature Energy for US$2bln Shell completes acquisition of renewable natural gas producer Nature Energy | Shell Global. Both Shell and BP have access to a large customer base including Industry and other hard-to-abate sectors such as Marine, Heating and Road Transport. With these acquisitions they have become the largest producers and traders of renewable natural gas with diversified end uses to help customers and society decarbonize and at the same time contribute to circular economies.

According to the World Biogas Association and IEA Net Zero Emissions by 2050 Scenario (*), global production of biogas should quadruple by 2030 with a production close to 200 bcm by 2030 (from c.50 bcm today) and over 400 bcm by 2050. Various sources project double the market demand by 2030 driven by decarbonization of hard-to-abate sectors. All existing and emerging regulatory frameworks suggest that biomethane production could surpass the above target. China and India need to accelerate the development of feedstock supply chains in the agriculture, livestock and municipal waste sectors. Other regions with strong biogas potential such as Latin America and Southeast Asia, could make significant contributions to global growth if enough public support is granted to incentivize development of the sector.

(*) ?World Biogas Association (WBA) | IEA World Energy Outlook 2023 - What's in Store for Global Energy?