Three Ways to Kickstart the Use of Biomethane in Asia

Eliminating the methane in natural gas is not possible as methane is the main fuel component in natural gas. Therefore, it is better to look for alternatives to natural gas. One is biomethane, which is identical to natural gas but derived from biological resources, not fossil resources.

Biomethane can be derived from crop residues, water treatment sludge, gas from landfills, food waste, and other organic sources. It is the ultimate indigenous fuel source. The carbon it emits is recycled from carbon already in the atmosphere, unlike fossil methane, which pumps greenhouse gases, captured and stored millions of years ago, back into our ecosystem. 

This renewable form of “natural gas” can be used for transport, industry or to make electricity.  It also can be stored, transported in existing pipelines, and is energy efficient, as the heat from its production can be used in other processes.

This renewable form of “natural gas” can be used for transport, industry or to make electricity.

Here are three actions that developing countries can take to accelerate the use of biomethane:

Leverage the power of data: These diverse biological resources tend to be distributed across large areas, in landfills, water treatment plants and other sources of organic waste. This is very different from large fossil energy sources with a highly developed refining and distribution infrastructure and entrenched business practices.

The production of biomethane requires expertise which is more agricultural than the high technology process skills in the petrochemical industry. Whilst it is far less pollutive, it is not seen as simple, cheap, and reliable like fossil fuels.  

But this view might be changing, as recent geopolitical events have spiked fossil fuel prices globally, and Paris commitments are slowly impacting the level of investment in fossil fuel supply chains. 

This is happening while advances in digitization are helping to create new business models for energy storage, demand response management, energy trading, and distributed renewable energy, such as biomethane. 

Simply put, the costs of accessing biomethane’s distributed sources are reducing as we can manage data more effectively to identify distributed biological feedstocks. This creates the opportunity to exploit biomethane for an equitable transition to renewable energy. 

Reduce subsidies to fossil fuels: Biomethane doesn’t enjoy the subsidies which petrochemicals do. According to the International Monetary Fund, globally, fossil fuel subsidies represent nearly $5.9 trillion or 6.8 percent of GDP in 2020 and are expected to increase to 7.4 percent of GDP in 2025.

There are attempts to reduce the need for these subsidies. Global Methane Pledge, which was launched at COP26 in 2021 to reduce methane emissions by at least 30% by 2030, will catalyze reducing the fossil fuel subsidies. 

By using an indigenous resource, like local waste, to create energy, costly imports can be avoided. By incentivizing the use of biomethane, the perverse incentives for fossil fuels and tax losses associated with these incentives can be avoided and redeployed whilst keeping the economy moving. Most importantly, new jobs for semi-skilled workers can be made within the economy.

Biomethane at source can be sold at a discount to the price of natural gas delivered nearby.  When the price of transport is added, there is about 15% premium to existing natural gas prices. Depending on the price of carbon, transport type, and distance, the selling price of biomethane could be half the price of fossil fuel subsidy supported natural gas. 

The price advantage of biomethane is eroded by equipment upgrades and supply chains when compared to liquid petroleum gas (LPG) for cooking.  These are balanced out when carbon pricing is included to balance the fossil fuel subsidy distortion.  

LPG prices in Bangladesh, India, and Sri Lanka are around $0.93/kg to $0.95/kg. Locally produced biomethane could cost $0.75/kg without subsidies. With delivery charges and carbon pricing taken into account, the current price could be cut by more than half, to $0.40/kg, making it attractive to switch from LPG for cooking. The challenge will be developing the biomethane supply chain based on industrial customers who are more price-sensitive and reliability-sensitive.

Encourage local businesses and the employment of women: Approaches to maximize the value of indigenous resources are difficult for large energy monopolies. These types of projects are best done by smaller businesses making use of the distributed nature of the fuel generation. 

Regulations to support these smaller businesses should be developed that are nimble and use circular economy principles. This allows indigenous energy sources to be used by local businesses with local workers for local benefits.

The biomethane supply chains include roles with variable working hours and conditions that allow for women to take part, especially in the digital part of the supply chain.

The days of low-cost fossil fuels without liability for emissions are over. To pursue an equitable and ‘just’ energy transition, we need to find new ways to produce energy. Biomethane is a cheap, reliable, and community-building way to start.