Biogas Price

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. In the aftermath of World War II, devastated European countries were in serious want of energy and electric power. 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.

Supply and demand

The many applications and uses of biogas become evident as need arises. 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.

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 Agreement, 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. Much depends on the substrate used and the intended application of the biogas — electricity, heating or fuel.