2.1.3 Emerging biomethane cost reduction

Biomethane production costs for anaerobic digestion in Europe have a large spread; €49/MWh to €90/MWh (~€0.50/m3 to €0.90/m3), mainly depending on feedstock and digester size. The production cost for thermal gasification, in contrast, is estimated around €90-€100/MWh (~€1.0/m3). Costs are gradually coming down for larger plants with certain waste stream feedstocks.

The cost drivers for biogas production include capital and operational costs, the size of the digester, the production technique, and the feedstock cost (Table 2‑1). Biomethane production costs additionally include the cost of the upgrading unit.

Table 2‑1. Overview of the cost values (2018) for the most important parameters in biomethane anaerobic digestion production process. Source: (IEA, 2020c)

Technology Size digester (Nm3/hr) CAPEX (€/MWh) biogas digester* OPEX (€/MWh) biogas digester* Biogas to bio-methane upgrading (EUR/MWh) Feedstock cost (EUR/tDM) Maturity level
Small anaerobic digestion 100 25 22 2 – 4

0 – 120

Average in Europe:1

Medium anaerobic digestion 500 20 17
Large anaerobic digestion 1000 15 12
Very large >2000-3000 Not available2 Not available53

* costs converted from USD/MBtu and rounded, with 1 USD = 0.85 EUR.

The cost for feedstock varies greatly with an average feedstock cost in the EU between €19-36/tonne dry matter (tDM) in 2015.3 Feedstock cost can generally range from a negative cost for certain waste products, to up to ~85 €/tDM and higher for certain agricultural feedstock.4 Current estimates in Europe are on average around €25/tDM for manure, €47/tDM for agricultural residues, €78/tDM for silage and €120/tDM for dedicated energy crops.5

The total production cost of biomethane based on anaerobic digestion ranges between ~€49/MWh and €90/MWh in Europe with an average cost of around €70/MWh (Figure 2‑12).6 Currently, most biomethane production is based on anaerobic digestion using medium silage digesters resulting in production costs of about €90/MWh. Using manure or agricultural residues as feedstock in combination with larger digesters (around 1000 Nm3/hr) reduces the production costs to about €70/MWh. Cost can be further reduced for very large-scale production and the use of waste residues feedstock to ~€50/MWh.7

The production costs of biomethane based on thermal gasification are estimated around €90-€100/MWh.8,9 The production cost of thermal gasification has in the past proven to be able to reduce to ~€88/MWh.10

Production costs for biomethane production through both anaerobic digestion and thermal gasification are expected to drop to about €47MWh- €57/MWh in 2050.2 Biomethane production costs are still high, in particular compared to the price of alternative fuels, such as natural gas (including natural gas price and carbon price). However, certain consumers may want to pay a premium for biomethane to achieve their corporate emissions reduction targets or obtain round-the- clock green energy. The value of biomethane can also be strengthened through the marketing of biomethane digestate as organic fertiliser or through other positive (cross-sectoral) externalities (see section 2.1.4).

Current biomethane production installations are mostly located close to existing natural gas grids, resulting in limited grid connection and injection costs (around 5% of total production costs).6 Grid injection and connection costs depend on the type of production process. For anaerobic digestion plants, the upgrading facilities are often located close to gas grids, resulting in an estimated average grid injection and connection cost of around €4.7 /MWh per year.6 The total biomethane network costs also include costs for biogas pipelines to the biomethane upgrading facility and a pipeline from the biomethane facility to the gas grid. Total biomethane network costs are estimated to be around €9.7/MWh.6

For thermal gasification plants, grid injection and connection costs are expected to be limited because the biomethane is already produced at high pressure, enabling more ready injection into the gas grid. These units are therefore logically located close to infrastructure hubs with ready access to feedstock and existing gas grid connections. The grid connection and injection costs are estimated to be around €2/MWh per year.6