This report uses a new IEA estimate of the sustainable technical potential of biogas and biomethane supply, based on a detailed assessment of the availability of 19 types of feedstocks across the 25 regions modelled in the World Energy Model. The assessment used detailed cost, feedstock and technology data to derive supply cost curves illustrating the potential scale and commercial viability of different biogas and biomethane production pathways around the world. This section considers first the potential and costs for biogas, followed by those for biomethane.

For biogas, this report considered 17 individual types of residue or waste, grouped into the four feedstock categories described in Section I, namely crop residues, animal manure, the organic fraction of MSW and wastewater sludge. Biogas production pathways vary by feedstock and region and rely on the following main technologies: biodigesters (including centralised digesters at small, medium or large scale and decentralised digesters at household scale), landfill gas recovery systems, and wastewater treatment municipal plants.

For biomethane this report considered two main production pathways: upgrading biogas and the gasification of biomass. For biogas upgrading, the same feedstocks assessed for biogas have been considered, on the assumption that these can be used either for biogas production or for upgrading biogas to biomethane. The alternative route to biomethane production – gasification – opens up the possibility of using two additional sources of solid biomass feedstock: forestry residues and wood processing residues.

This analysis focuses primarily on the opportunities and costs of biogas and biomethane, thereby excluding technologies to convert electricity to gas (also known as power-to-gas) and methanation using the CO₂ extracted during the biogas upgrading process.

As noted in Section I, this analysis includes only the technical potential of feedstock that can broadly be considered sustainable. This is defined as feedstocks that can be processed with existing technologies, which do not compete with food for agricultural land and that do not have any other adverse sustainability impacts (e.g. reducing biodiversity). Although energy crop residues are included, energy crop feedstocks grown specifically to produce biogas and biomethane are not included on the basis that their sustainability warrants further in-depth analysis outside the scope of this study.

The estimates of the sustainable technical potential of biogas and biomethane evolve over time, and are affected by gross domestic product (GDP) and population growth, urbanisation trends, changes in waste management, and anticipated rates of technology evolution.

This report’s assessment of supply costs matches feedstock availability with the appropriate production technologies, and draws on a number of case studies of the unit costs of biogas and biomethane production around the world. The costs presented here differ slightly from those in the World Energy Outlook 2019 (IEA, 2019b). This is mainly due to the adoption of a more comprehensive data set for biogas upgrading technologies, separate consideration of the costs of connecting upgrading facilities to the gas grid, and inclusion of the latest published data and information.

There are many different pathways for biogas production, involving different feedstocks and biogas technologies. Livestock manure is the most common feedstock, but the biogas production yield is significantly lower than what could be obtained from crop residues. Industrial waste is the highest-yielding feedstock, able to provide around 0.40 toe of energy per tonne. Besides yields, there is variation in the cost and effort required for collecting different volumes of feedstock. Technologies also vary; this report assessed the following:

• Decentralised biodigesters at household scale, categorised into either basic or advanced technologies
• Centralised biodigesters systems categorised by small (100 cubic metres per hour [m³/h]), medium (250 m³/h) and large scale output flow rates (750 m³/h)
• Existing wastewater treatment plants adapted to process sludge produced at the municipal level (1 000 m³/h)
• Landfill gas recovery systems to recover biogas produced from closed landfill sites (2 000 m³/h).

Household-scale biogas systems can provide heating and cooking fuels in developing countries, as an alternative to the traditional use of solid biomass. The output of these units are typically around 1 m³ per day, providing two to three hours of gas-fired stove cooking time for every 20 to 30 kg of animal manure (SNV, 2019). The capital costs of these basic technologies lie in a range of USD 3-8/MBtu (USD 10-30/MWh) and generally have shorter lifetimes and variable production yields. Feedstocks are usually available locally at zero cost, and in many cases the deployment of these systems has been supported through development programmes.

The picture changes when biodigesters scale up. Providing a continuous flow of organic material in significant quantities requires a more structured system to collect industrial quantities of feedstock. The biogas output is then typically connected to a captive power or co‑generation plant involving additional investments. To ensure efficient operation, temperatures need to be maintained generally in the range of 30-45°C, and the feedstock must be continuously moved. For these reasons, centralised commercial and industrial biogas plants are more technologically sophisticated and their capital and operating costs per unit of energy produced are higher, although they also offer higher levels of efficiency and automation.

Anaerobic digestion systems can be installed at water treatment plants (through the processing of sewage sludge with high moisture content). Adapting a wastewater treatment plant entails high upfront investment costs averaging around USD 15/MBtu, but can significantly improve the longer-term economics of the plant. However, treatment capacities must generally be higher than 5 000 m³ per day in order for the facility to be cost-effective. Landfill gas extraction is possible for closed landfill facilities containing MSW. This technology is best positioned to benefit from economies of scale, with production costs below USD 3/MBtu.

The suitability of these various technologies depend on factors such as location, feedstock availability and end-use applications. In this analysis each type of feedstock is allocated to the most suitable technology, resulting in the supply cost curves, presented below, which combine technology and feedstock costs.

This report estimates that nearly 600 Mtoe of biogas could be produced sustainably today. Developing economies currently account for two-thirds of the global potential, with developing countries in Asia holding around 30% and Central and South America another 20%. The sustainable feedstock in Africa is smaller, but would nonetheless be sufficient to meet the needs of the 600 million people in sub-Saharan Africa who remain without access to electricity.

Crop residues together with animal manure are the largest sources of feedstock, particularly in developing economies where the agricultural sector often plays a prominent role in the economy. In India, where the agricultural sector contributes 17% of GDP and around half of overall employment, the vast majority of biogas potential comes from sugar cane, rice and wheat crop residues. In Brazil, there are large volumes of maize and sugar cane residues coming from its sugar and ethanol industries, while the scale of the meat industry in China means that it is well-positioned to use animal manure for biogas production.

One-third of the total potential is in advanced economies and over half of this is in North America, with a further 30% in the European Union. The biogas supply potential in the United States is divided equally among crop residues (mainly corn residues from the ethanol industry), animal manure and MSW. In the European Union the potential contribution of MSW to biogas production is much lower due to regulations that have drastically reduced the fraction of organic matter flowing into landfills.

Globally, the costs of producing biogas today lie in a relatively wide range between USD 2/MBtu to USD 20/MBtu. There are also significant variations between regions; in Europe, the average cost is around 16/MBtu, while in Southeast Asia it is USD 9/MBtu. Around 70-95% of the total biogas costs are for installing biodigesters, with the remainder involving feedstock collection and processing costs. There is huge variability, as feedstocks can be zero-cost or even negative in cases where producers of waste are obliged to pay to dispose of their waste, whereas in other cases “gate fees” for certain agricultural feedstocks may be as high as USD 100/tonne in some regions.

Biogas is produced and consumed locally, meaning transportation costs are negligible. However, these estimates exclude the investments required to transform biogas into electricity or heat, and this can be considerable in some cases; for example, adding a co‑generation unit and including power grid connection and heat recovery distribution can add an additional 70% to the costs of an integrated project.

While constructing larger and more industrialised facilities could provide some economies of scale, in general there is only modest scope for cost reductions as the main production technologies are already mature. Cost-competitive production routes do, however, exist: in all regions, landfills equipped with a gas recovery system could provide biogas for less than USD 3/MBtu (about USD 10/kWh); this represents around 8% of the global supply potential.

In total, this report estimates that around 100 Mtoe of today’s biogas potential could be exploited in different parts of the world at a cost equal to or lower than prevailing natural gas prices. This is already three and a half times the current level of biogas production globally.

This report’s assessment of the sustainable potential for biogas production in 2040 is 50% higher than today, based on increased availability of the various feedstocks in a larger global economy. The projected costs of production also fall modestly over time.

There are significant variations in dynamics across different regions, with the biogas supply potential in developing economies growing at around twice the rate of advanced economies. This is mainly due to the increased availability of animal manure and MSW along with the rising potential to produce biogas from wastewater treatment plants.

Changes in dietary habits, with a growing number of people consuming more protein-rich diets, increases the size and scale of the meat industry and therefore the availability of animal manure. Increased urbanisation and waste collection also increase the availability of MSW in some developing economies; In India and Southeast Asia, for example, the improvement of waste management and collection programmes leads to significant growth in the availability of MSW (reaching 36 Mtoe in 2040, three times the current assessment). The level of wastewater available for biogas production also increases by around 6% per year over the period to 2040.

More sophisticated and sustainable waste management practices could in some cases reroute feedstock away from certain biogas production technologies. For example, the availability of landfill gas could be reduced if organic waste is collected separately and used for other purposes, such as composting or transport biofuel production.

In 2040, the agricultural sector remains the largest contributor to global biogas supply potential, with crop residues accounting for over 40% and animal manure for 35% of the total. Availability of animal manure as a feedstock is projected to increase by around 2.5% on average each year, double the rate of increase for crop residues. MSW provides a much smaller fraction of total potential in 2040 than today. Nonetheless, there is still scope to produce more than 80 Mtoe in 2040, with landfill gas remaining the lowest-cost source of supply.

Overall, biogas production costs are projected to decrease slightly while natural gas prices tend to increase. Countries and regions where projected natural gas prices are relatively high, such as China and Southeast Asia, and regions with ambitious climate targets could therefore have strong incentives to increase their biogas production.

In total, this report estimates that in 2040 over 260 Mtoe of biogas could be produced worldwide for less than prevailing regional natural gas prices in STEPS, which average around USD 9/MBtu in importing regions such as Europe and most developing Asian economies, USD 7/MBtu in Africa, and around USD 4.5/MBtu in North America.

One option to increase the competitiveness of biogas is to monetise the by‑products from its production. Producing biogas leaves a residue of fluids and fibrous materials called “digestate”. The handling and disposal of digestate can be costly and as a result it is often considered a waste rather than a useful by‑product. However, in certain locations and applications, digestate can be sold as a natural fertiliser, helping to offset a part of the production cost. European regulations have recently recognised the role organic materials play in the production of digestate (EBA, 2019).

The potential for biomethane production today is over 700 Mtoe, which is higher than biogas because of the inclusion of woody biomass as a feedstock for thermal gasification; this increases the total possible resource base by a fifth. However, the vast majority of global biomethane potential today is linked to the upgrading of biogas.

This potential has a wide geographic spread: at a regional level, the United States and Europe each hold a 16% share in the global total, but there is also major potential in China and Brazil (each with 12%) and India (8%). As with biogas, the potential could be even larger if energy crops were to be included, but classifying them as “sustainable” would require case-specific consideration of possible competition between biomethane and food production. This does not mean, however, that the feedstocks included in this assessment do not compete with one another for alternative uses: for example, forestry residues can be a sustainable source of direct heat, while crop residues can be used for animal feed or to produce advanced biofuels.

Cost curves for biomethane equal the biogas production costs plus the additional costs required for upgrading. An assessment of woody biomass that can be processed via gasification is also included. This report estimates that the global average cost of producing biomethane through biogas upgrading today is around USD 19/MBtu. Most of this cost is attributable to the production of the biogas, with the upgrading process costing around USD 2/MBtu to USD 4/MBtu for a facility that upgrades around 3.5 million m³ of biogas per year. The cost of the upgrading process can vary significantly for different facility sizes and across different regions: for example, in North America, upgrading costs are at the lower end of this range due to economies of scale captured by larger unit sizes.

Grid connection represents a potential additional cost (if the biomethane is to be injected into gas networks rather than used locally). Proximity to the gas network is a significant cost factor, and to be cost-effective plants must generally be located very near to gas grids. Typical network connection costs are around USD 3/MBtu, split roughly equally between pipeline infrastructure and grid injection and connection costs (Navigant, 2019). In developing economies in Asia a significant buildout of the gas network is assumed, concurrent with the projected increase in natural gas demand, meaning a greater amount of feedstock is geographically proximate to the gas grid.

There is growing interest in biomass gasification as a way to produce biomethane at a larger scale. However, very few plants have been successfully developed thus far (OIES, 2019). Gasification is currently the more expensive method of production in all regions with average costs around USD 25/MBtu globally. The potential is also limited by the availability of cost-effective feedstock such as forestry management and wood processing residues. Other possible feedstock sources for biomass gasification would be MSWs and agricultural residues.

Looking ahead to 2040, this report estimates that the global biomethane potential increases by more than 40% compared with today. Most of this stems from increased availability of biogas (as described above); the potential for biomass gasification grows at a much slower pace.

There are limited prospects for major reductions in the cost of producing biomethane. The technologies for biogas production and upgrading are relatively mature although there may be higher potential to bring down the cost of biomass gasification. Larger facilities could also provide some economies of scale for both production routes. Overall, by 2040, this report estimates that the average cost of producing biomethane globally is set to be around 25% lower than today, at around USD 14/MBtu.

Natural gas prices in several regions are very low today, a consequence of ample supplies of gas and of liquefied natural gas (LNG). However, there are still commercially viable opportunities for biomethane in some markets. Taking into account biomethane costs and natural gas prices across different regions, this report estimates that around 30 Mtoe of biomethane could be produced today for less than the domestic price of natural gas in the relevant regions, most of which involves fitting landfill sites with gas capture technologies. If this were to be fully exploited, this would represent around 1% of today’s natural gas demand.

Whereas most sources of biomethane in advanced economies are significantly more expensive to produce than today’s natural gas prices, this is not necessarily the case in parts of the developing world. This is particularly visible in parts of Asia, where natural gas is imported and therefore relatively expensive, and where biogas feedstock is available at a very low cost; in India for example, the share of today’s natural gas demand that can be met cost-effectively by biomethane is 10%. By 2040 this rises to almost two thirds.

A key reason for the relatively low uptake of biomethane in developing countries is the lack of specific policies encouraging its development. The relatively high cost of capital is also a barrier to investment. There are also non‑economic barriers, such as the lack of awareness and information, and the scarcity of expertise in the design, installation and maintenance of biomethane production plants.

Monetising some of the by‑products from biomethane production could improve its cost-competitiveness. In addition to the potential use of digestate as fertiliser, biogas upgrading also results in a pure stream of CO₂ that could be used by other industries. The revenues that can be achieved through selling digestate or the pure CO₂ stream, however, are likely to be relatively modest and in most cases would not be sufficient to close the cost gap entirely with natural gas.

Ultimately, the cost-competitiveness of biomethane in most markets relies on pricing externalities. If CO₂ prices are applied to the combustion of natural gas, then biomethane becomes a more attractive proposition. If policy recognises the value of avoided methane emissions that would otherwise take place from the decomposition of feedstocks, then an even larger quantity would be cost-competitive. Methane is such a potent GHG that attaching a value to these avoided emissions makes a dramatic difference to its overall supply cost profile.