According to the International Energy Agency’s (IEA) most recent forecasts, biogas is expected to gain as a percentage of total energy usage around the globe. Crediting this future to inexpensive feedstocks, government supports and the relatively higher price of naturals gas, IEA asserts that the world is already using around 35 megatons of oil equivalent of biogas for electrical power, heat and hot water, as well as biofuel to propel vehicles. This begs the inevitable question: as biogas and biomethane gain in international demand, what are the implications for biogas price? Will it go the way of conventional natural gas?
Developing Biogas Resources
As early as 250 years ago, scientist discerned the presence of methane when examining gaseous emanations from marshes. Soon thereafter, the chemical composition of methane was formulated and work on its application as a flammable gas began in earnest. Collection of biogas ensued throughout the 19th century when it was used to light street lamps. Crude biogas plants could be found on farms in the late 1800s but the real breakthrough was in Manchester, England in 1911. A large-scale biogas plant was erected in the interest of treating sewage and generating electricity. By 1939, biogas plants could hold 10 cubic meters (over 350 cubic feet or 2,600 gallons) of substrate — that is, the organic matter that is disintegrated for biogas release.
The principle upon which biogas production rests is anaerobic digestion: when organic matter, be it animal manure, decaying foliage, edible by-products or wildlife carcasses — to list some examples — decomposes without oxygen it is subject to a sequence of chemical reactions that end with the discharge of methane (CH4) and carbon dioxide (CO2). This can happen in the biomes of the earth or in manufactured facilities of human design. The history of biogas collection attests to this.
In the aftermath of World War II, devastated European countries were in serious want of energy and electric power. However, livestock manure was abundant so France, Germany and other nation-states saw major increase in biogas plants until cheaper sources returned to availability. In the 1970s, biogas alternatives enjoyed a brief revival as Middle East oil was embargoed or otherwise restricted. A few questions remain: why was biogas more expensive than oil, natural gas and other energy supplies. What factors affect biogas price? What took so long for biogas to take off in the United States?
Supply and Demand
The many applications and uses of biogas become evident as need arises. Not having suffered a war on its soil since 1865, power infrastructure and supplies remained relatively intact. Biogas, it stands to reason, was never viewed as necessary until very recently. As long as fossil fuels were plentiful and getting the job done, there was little urgency about pursuing other options. While oil prices soared and plunged, their fluctuations were never so violent as to suggest the preferability of alternate energy forms. As long as laws of supply and demand ruled, biogas continued as an unsung resource.
Two ecological forces have come to change the supply/demand dynamics. The growing concern over atmospheric stability in the face of continued fossil fuel emissions have made businesses and governments re-think focusing on coal and oil as primary energy makers. In addition, the growing problem of waste management makes anaerobic digestion an appealing vehicle for disposal and recovery. Now, biogas markets are expanding and businesses are getting on board with the collection and distribution of this new means toward heating, electricity generation and automotive fueling. Science has also increased the value of biogas by developing new ways to clean it of contaminants.
How Are Prices Set?
The market price of biogas is first determined by calculating the cost of production. This includes the amount of investment needed to construct a biogas plant, which will be contingent on scale, substrate and purpose. Given the nature of substrate, it is widely available at presumably low cost. However, some must be pre-treated before anaerobic digestion. Furthermore, the gas may require considerable processing depending on its purpose. Vehicle fuel, as an example, is highly refined and compressed for transportation and holding. Biogas production cost must then be examined in the light of consumer need.
Where Do Prices Stand?
Predictions by energy analysts tend to be positive relative to biogas demand. Since many countries have signed on to the Paris Climate Change Ageement, pressure is on power and fuel providers to move away from the broad use of fossil fuels in favor of sources that are carbon neutral. At the same time, large-scale biogas facilities are a hefty investment for the public and private sectors. In 2018, the Oil Price Information Service indicated that upgraded biomethane hovered around $30 per million British Thermal Units (BTUs). If demand remains stable or rises, that figure, too, may increase. However, it is difficult to translate into what biogas cost per kg, for example. Much depends on the substrate used and the intended application of the biogas — electricity, heating or fuel.
The price of biogas is subject to multiple variables: degree of purification; organic materials used for digestion; and its designated purpose. In general, though, overall demand is expected to rise, making the costly investment in production more palatable.