Outlook for biogas and biomethane: Prospects for organic growth

World Energy Outlook special report
In this report

This report provides estimates of the sustainable potential for biogas and biomethane supply, based on a detailed assessment of feedstock availability and production costs across all regions of the world. These form the basis on an outlook for biogas and biomethane supply and demand up to 2040, based on the scenarios presented in the annual World Energy Outlook.

Key focus areas include how big a role these gases can play in the transformation of the global energy system, where the opportunities and potential pitfalls lie, and what policy makers and industry can do to support sustainable growth in this sector.

Introduction

The case for biogas and biomethane lies at the intersection of two critical challenges of modern life: dealing with the increasing amount of organic waste that is produced by modern societies and economies, and the imperative to reduce global greenhouse gas (GHG) emissions.

By turning organic waste into a renewable energy resource, the production of biogas or biomethane offers a window onto a world in which resources are continuously used and reused, and one in which rising demand for energy services can be met while also delivering wider environmental benefits.

In assessing the prospects for “organic growth” of biogas and biomethane, this new report from the International Energy Agency (IEA) explores how big a role these gases can play in the transformation of the global energy system, where the opportunities and potential pitfalls lie, and what policy makers and industry can do to support sustainable growth in this sector.

The answers to these questions rest on a major new IEA analysis of the sustainable potential for biogas and biomethane supply, including a detailed assessment of feedstock availability and production costs across all regions of the world.

This provides a platform to explore the various services that biogas and biomethane can provide in different countries, which vary widely depending on circumstances and policy priorities. Biogas can be a valuable local source of power and heat, as well as a clean cooking fuel to displace reliance on the traditional use of solid biomass in many developing countries. There are also potential co-benefits in terms of agricultural productivity (as a result of using the residual “digestate” from biodigesters as a fertiliser) and reducing deforestation.

When upgraded, biomethane (also known as renewable natural gas) is indistinguishable from natural gas and so can be transported and used in the same way. Biomethane can deliver the energy system benefits of natural gas while being carbon-neutral.

The value of biogas and biomethane is heightened in scenarios such as the IEA Sustainable Development Scenario (SDS), which meet in full the world’s goals to tackle climate change, improve air quality and provide access to modern energy. Projections from the SDS provide an essential benchmark for much of the discussion in this report.

Biogas and biomethane have the potential to support all aspects of the SDS, which charts a path fully consistent with the Paris Agreement by holding the rise in global temperatures to “well below 2°C ... and pursuing efforts to limit [it] to 1.5°C”, and meets objectives related to universal energy access and cleaner air.

The other scenario referenced in the analysis is the Stated Policies Scenario (STEPS), which provides an indication of where today’s policy ambitions and plans, including national policy announcements and pledges, would lead the energy sector.

Comparison between the outcomes in these two scenarios provides an indication of the range of possible futures that are open to biogas and biomethane, and the policy and technology levers that will affect which pathway they ultimately follow. 

Key findings

Modern societies and economies produce increasing amounts of organic waste that can be used to produce clean sources of energy, with multiple potential benefits for sustainable development. Biogas and biomethane are different products with different applications, but they both originate from a range of organic feedstocks whose potential is underutilised today. The production and use of these gases embody the idea of a more circular economy, bringing benefits from reduced emissions, improved waste management and greater resource efficiency. Biogas and biomethane also provide a way to integrate rural communities and industries into the transformation of the energy sector. 

Biogas and biomethane production pathways

A detailed, bottom-up study of the worldwide availability of sustainable feedstocks for biogas and biomethane, conducted for this report, shows that the technical potential to produce these gases is huge and largely untapped. These feedstocks include crop residues, animal manure, municipal solid waste, wastewater and – for direct production of biomethane via gasification – forestry residues. This assessment considers only those feedstocks that do not compete with food for agricultural land. Biogas and biomethane production in 2018 was around 35 million tonnes of oil equivalent (Mtoe), only a fraction of the estimated overall potential. Full utilisation of the sustainable potential could cover some 20% of today’s worldwide gas demand. 

Biogas and biomethane production in 2018 against the sustainable potential today

Every part of the world has significant scope to produce biogas and/or biomethane, and the availability of sustainable feedstocks for these purposes is set to grow by 40% over the period to 2040. The largest opportunities lie across the Asia Pacific region, where natural gas consumption and imports have been growing rapidly in recent years, and there are also significant possibilities across North and South America, Europe, and Africa. The overall potential is set to grow rapidly over the next two decades, based on increased availability of the various feedstocks in a larger global economy, including the improvement in waste management and collection programmes in many parts of the developing world. 

Production potential for biogas or biomethane by feedstock source, 2018

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Biogas is a mixture of methane, CO2 and small quantities of other gases that can be used to generate power and to meet heating or cooking demand. Its uses and competitiveness depend on local circumstances, but a common element is that biogas offers a sustainable way to meet community energy needs, especially where access to national grids is more challenging or where there is a large requirement for heat that cannot be met by renewable electricity. In developing countries, biogas reduces reliance on solid biomass as a cooking fuel, improving health and economic outcomes. In the SDS, biogas provides a source of clean cooking to an additional 200 million people by 2040, half of which in Africa.

Biogas can also be upgraded to produce biomethane by removing the CO2 and other impurities. 

Outlook for global biogas consumption by sector in the Sustainable Development Scenario, 2018-2040

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Outlook for global biogas consumption by sector in the Stated Policies Scenario, 2018-2040

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Biomethane is a near-pure source of methane produced either by “upgrading” biogas or through the gasification of solid biomass; since it is indistinguishable from the regular natural gas stream, it can be transported and used wherever gas is consumed, but without adding to emissions. Biomethane grows rapidly in IEA scenarios. It allows countries to reduce emissions in some hard-to-abate sectors, such as heavy industry and freight transport. It also helps to make some existing gas infrastructure more compatible with a low-emissions future, thereby improving the cost-effectiveness and security of energy transitions in many parts of the world.

Biomethane in the SDS avoids around 1 000 million tonnes (Mt) of GHG emissions in 2040. This includes the CO2 emissions that would have occurred if natural gas had been used instead, as well as the methane emissions that would otherwise have resulted from the decomposition of feedstocks.

Outlook for global biomethane consumption by region in the Sustainable Development Scenario, 2018-2040

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Outlook for global biomethane consumption by region in the Stated Policies Scenario, 2018-2040

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With the exception of some landfill gas, most of the biomethane assessed in this report is more expensive than the prevailing natural gas prices in different regions. The average price for biomethane produced today is around USD 19 per million British thermal units (MBtu), with some additional costs for grid injection. However, this report estimates that around 30 Mtoe (~40 billion cubic metres [bcm]) of biomethane – mostly landfill gas – could be produced today at a price that undercuts the domestic price of natural gas; this is already ten times more than total biomethane consumption today.

The cost gap is projected to narrow over time as biomethane production technologies improve and as carbon pricing in some regions makes natural gas more expensive. Recognition of the value of avoided CO2 and methane emissions goes a long way towards improving the cost-competitiveness of biomethane.

Cost ranges for developing global biomethane potential today

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Multiple fuels and technologies will be required to accelerate energy transitions, and low-carbon gases – led by biomethane and low-carbon hydrogen – have critical roles to play. The 20% share of electricity in global final consumption is growing, but electricity cannot carry energy transitions on its own against a backdrop of rising demand for energy services. Biomethane is the largest contributor to low-carbon gas supply in the time horizon of the World Energy Outlook (WEO) Scenarios. How the biogas and biomethane industry evolves will vary by country depending on the sectoral focus, feedstock availability, prevailing market conditions and policy priorities. In all cases, however, realising the multiple benefits of biogas and biomethane requires co‑ordinated policy-making across energy, transport, agriculture, environment and waste management.

Final energy consumption by carrier in the Sustainable Development Scenario, 2018 and 2040

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