Technical Report

Biomethane – Status and Factors Affecting Market Development and Trade

September 2014

Executive Summary

In most IEA member countries, natural gas (NG) plays an import and particular increasing role in energy provision to meet the demand for heat, electricity and transport fuels. Hence, natural gas is an important all-round energy carrier with an already well-developed infrastructure in some countries such as gas grids, filling stations, road transport via heavy duty vehicles or marine transport via tanker in the form of compressed natural gas or liquefied natural gas. Nevertheless natural gas is a fossil based fuel and various countries have initiated the stepwise transition from a fossil resource base towards renewables due to concerns regarding greenhouse gas emissions, energy security and conservation of finite resources.

Biomethane, defined as methane produced from biomass with properties close to natural gas, is an interesting fuel to support the transition from fossil fuels to renewables and to achieve the greenhouse gas emission reduction targets in different ways. In principal, biomethane can be used for exactly the same applications as natural gas, if the final composition is in line with the different natural gas qualities on the market. Therefore, it can be used as a substitute for transport fuels, to produce combined heat and power (CHP), heat alone or serve as feedstock for the chemical sector. It can be transported and stored in the facilities and infrastructure available for natural gas. Biomethane can be produced by upgrading biogas or as so called bio-SNG from thermo-chemical conversion of lignocellulosic biomass or other forms of biomass.

The aim of this study is to provide an up-to-date overview of the status of biomethane (which includes upgraded biogas and bio-SNG in this report) production, grid injection and use in different countries, and to illustrate the options and needs for the development of larger biomethane supply strategies. The focus is on technical, economic and managementrelated hurdles to inject biomethane into the natural gas grid and to trade it transnationally. The study provides insights into the current status of technologies, technical requirements and sustainability indicators as well as cost of biomethane production and use in general and especially in selected countries. The study also assesses implementation strategies, market situations and market expectations in selected countries. Based on the findings in this report, proposals are given for actions to be taken to reduce barriers and to develop the market step by step.

The technical feasibility to produce biomethane from biogas on a large scale has been demonstrated over the last decade. Table 4-1 gives an overview of the biomethane production in selected IEA member countries. At the time of writing this report about 280 biogas upgrading plants were running in several countries with an overall production capacity of some 100.000 Nm³/h. To inject biogas in the natural gas grid or to use it as a vehicle fuel, the raw biogas has to be upgraded and pressurised. Biogas upgrading includes increasing the energy density by separating carbon dioxide from methane. Furthermore, water, hydrogen sulphide and other contaminants are removed, sometimes before the upgrading process to avoid corrosion or other problems in downstream applications. Today, a range of technologies for CO2-separation are on the market. It is difficult to specify the exact characteristics for an upgrading technology, since the design and operating conditions vary between the different manufacturers, sizes and applications. The key quality criteria for the upgrading technologies are the energy demand and the methane loss during upgrading. The production of biomethane via thermo-chemical conversion is still in the pilot and demonstration stage, with no commercial market penetration so far. 

The small-scale production of biomethane at many different locations is a new phenomenon, and requires additional efforts to adapt the regional infrastructure and to find adopted transport modes outside the natural gas grid. Biomethane may also play a significant role in future power-to-gas concepts by combination of renewable methane from excess energy, e.g. by providing the renewable carbon source (separated CO2), so that hydrogen produced from excess electricity and the renewable carbon source can be converted to methane, thus the overall methane output can be increased.

Even if the technical and logistical requirements for biomethane production are in principle available today and in some areas already implemented on a local level, clear criteria for the biomethane quality (transnational) to be fed- into the gas grid and the end use application are necessary. Compared to conventional fuels, the level of standardization is sparse for gaseous fuels. The international ISO (International Organisation for Standardization) has issued a natural gas standard, ISO 13686:1998 “Natural gas – Quality designation” and a standard for compressed natural gas, ”ISO 15403 Natural gas – Natural gas for use as a compressed fuel for vehicles”. The normative part of both standards contains no levels or limits, but have informal parts included with information for suggested values for gas composition, i.e. from national standards or guidelines from France, Germany, the UK and the U.S. The absence of quantitative limits reflects the prevalent view of the gas industry that no precise gas quality can be specified, given the wide range of compositions of the raw gas obtained from underground. Up to recent years, the natural gas vehicle business has adjusted to this, international and national standardization focussing more on safety issues regarding vehicle cylinders, other gas-related components and refuelling stations. Regarding biomethane, there is a range of national standards in Europe for the injection of upgraded and purified biogas to the natural gas grid. Work on the international standardization of biomethane has been on-going since 2006. The specific challenge is to define standards which are attractive for the different potential end-user (gas grid owner, automotive industry, etc.) to enter the new market. Intensive discussions primarily concern sulphur and silicon content. Currently, two different standards for grid injection and automotive specification are under development at European level and might be passed by the end of 2015.

One key driver for the application of biomethane is the reduction of greenhouse gas emission (GHG) due to the substitution of fossil fuels. The emission reduction potentials depend on both plant design and operation, as well as the GHG accounting methodology. By following best practices, it is possible to achieve GHG savings of over 80% when compared to the fossil fuel alternative. Key parts in the production of biomethane that contribute to these GHG emissions include biomass feedstock cultivation (e.g. energy crops like maize) and different biogas upgrading technologies. Sustainability standards for biomass have been discussed and developed in different contexts during the last years. The most important approaches are the indicators from the Global Bioenergy Partnership (GBEP) and the demands from the European Directives on Renewable Energy and Fuel Quality. The EU sustainable criteria are only obligatory for biomethane when it is used as fuel for transport. It is so far not obligatory for biomethane if it is used in other fields, such as for CHP. Outside the EU (e.g. USA (U.S. Congress 2005)) biofuel sustainability criteria are established for liquid biofuels but do not refer to biomethane.

Compared to natural gas, the biomethane provision is linked to higher costs, at least on the short- and middle-term. To ensure a sustainable feedstock as well as a proper and transparent mass balance for the biomethane which is transported and traded via the natural gas grid, uniform and cross-border standards for biomethane composition and quality are necessary.

Today, the biomethane market is still at the very beginning. Different strategies, investment programmes, support schemes and utilisation concepts have been adopted in different countries and there are different stakeholder expectations. Due to the complex supply chain, see Figure E-1, there are different environmental, economic and administrative hurdles for the market introduction of biomethane. On the other hand, a survey of market expectations in five selected focus countries of IEA Tasks 37 and 40 showed that many stakeholders have quite strong expectations for market growth. Even if the response to the survey per country is not sufficient for a statistically sound analysis, it gave an insight in the trends and perceptions in the countries (Austria, Belgium, Germany, The Netherlands and Sweden). Regarding the policy for biomethane, it can be concluded that a good framework is necessary to push biomethane development forward. Because of the challenging conditions of the post-economic crisis of 2008, biomethane needs political support and as a result of that financial support. This conclusion is the same for all the countries surveyed. Even in countries like Germany and Sweden that have strongly promoted biomethane, financial support is still an important factor. When asked if international trade should be developing, experts from Belgium, Germany and Sweden answered positively. Respondents from the Netherlands and Austria were more sceptical whether international trade could or should be established in the future. The main reason for doubt is that demand for biomethane in these countries is higher than the production, so there will be nothing left for export. The Swedish respondents reported that they hope to import biomethane to satisfy the increasing demand.