Switching your business to biogas: why and how much does it cost?

Switching your business to biogas: why and how much does it cost?

Switching natural gas consumption to biogas is a decarbonization lever increasingly identified in corporate climate action plans. What is biogas, what is its decarbonizing potential, and how can we plan the financial impact of a switch to biogas?

Louise Rocagel

Louise Rocagel

Climate Consultant

Update :

What is biogas and where does it come from?

Biogas is a product generally derived from the degradation of organic matter. Whether of animal or vegetable origin, organic matter can, through the action of micro-organisms in so-called "anaerobic" conditions, i.e. in the absence of oxygen, decompose and generate gas that can be recovered and used as combustion energy.

This degradation process, known as methanization, can occur naturally in certain environments such as marshes, or be intentionally implemented in specialized facilities called methanizers.‍

Biogas is considered a renewable energy source because it is derived from the degradation of natural organic matter, which is itself renewable. Biowaste used for biogas production includes "kitchen and table" waste (peelings, leftovers from meals, products that have expired or are unconsumed), "green" waste from park and garden maintenance (lawn clippings, dead leaves, shrub and hedge trimmings, etc.) and waste from farms.‍

Over 10 million tonnes of biowaste are produced every year in France. Yet today, 80% of bio-waste is destroyed , even though it could be bio-recycled and used to produce a more environmentally-friendly energy mix.

The terms biogas and biomethane are often used without distinction. The difference between the two terms lies in the chemical composition of the gas they describe. Biomethane is pure methane, whereas biogas is the "raw" result of methanization. The raw biogas obtained after methanization contains up to 75% methane (CH4), carbon dioxide (CO2) and traces of nitrogen (N2). Biogas can be purified to increase its methane concentration and obtain biomethane.

Today, biogas is produced from a variety of sources, including :

- Installation de Stockage des Déchets Non Dangereux (ISDND): organic waste stored and decomposed under anaerobic conditions.

- Household waste

- Agricultural and Territorial Sector

- Wastewater treatment plants (WWTP)

How much decarbonization can switching to biogas offer?

Natural gas risks

Natural gas" refers to gas that has been present in nature for millions of years and has been extracted from natural deposits by drilling. As with biogas, the main component of natural gas deposits is methane.

Natural gas is a less carbon-intensive energy source than oil and coal, but it remains a fossil fuel with limited available resources. Moreover, extracting it requires cumbersome drilling processes and releases methane and CO2 into the atmosphere through leaks, most of which are due to equipment failure.

Since methane is naturally colorless and odorless, this complicates its detection, particularly in the case of leaks that can occur at natural gas boreholes. These leaks can last for weeks before being detected, turning into massive methane leaks known as "super-emissions". This is what happened outside a storage facility in Los Angeles in 2015. Nearly 100,000 tonnes of methane escaped into the atmosphere in the space of four months[2].

Methane is a greenhouse gas, considered to be responsible for around 20% of the current greenhouse effect. Its "global warming potential" (GWP) is 28 times greater than that of CO2.

Why switching to biogas reduces your carbon footprint?

The compositions of biogas and natural gas are broadly the same, i.e. methane and carbon dioxide. Biogas can therefore replace the consumption of natural gas in its various uses: heating buildings, generating heat for industry, producing electricity through its combustion, fuel for vehicles, injection into the network supplying households for heating and cooking, etc.

In 2021, France's primary energy consumption will be 2,769 TWh, of which 15.5% will be natural gas, i.e. 429 TWh.[1] ADEME estimates that the use of biomethane enables a level of decarbonation of around 80%, compared with the use of natural gas.[3]‍

This significant reduction is due to the differences in production processes between biogas and natural gas:

  • Avoided leaks: Producing biogas rather than natural gas avoids the direct methane leaks that occur at natural gas fields.
  • Waste recovery: By using waste as the main source of raw material for methanization, biogas offers a recovery solution, making it possible to treat this waste while producing renewable energy.
  • Emissions avoided: Recycling waste and burning the methane produced naturally in landfills avoids harmful emissions. As the GWP of methane is 28 times greater than that of C02, burning methane with oxygen means that, overall, each molecule of methane is replaced by one molecule of CO2.
    Simplified formula for methane combustion: CH4 + 2 O2 → CO2 + 2 H2O
  • Valuable by-product: In addition to biogas production, the anaerobic digestion process generates a by-product called digestate. Digestate is a nutrient-rich material that can be used as an organic fertilizer or soil improver in agriculture. This further enhances the value of organic waste and promotes a circular economy.
  • Closed cycle of carbon capture and release: the combustion of gas, whether natural or biogas, emits CO2, as seen above. However, biogas combustion has a lower impact than natural gas combustion, because in the case of biogas, the CO2 emitted during combustion corresponds to the quantity previously captured by organic sources during their growth, and whose decomposition is the origin of biogas production. This constitutes a (virtually) closed cycle of carbon capture and release. Natural gas, on the other hand, emits carbon stored for millions of years in the form of carbon dioxide.
Complete diagram of a methanizer network operation

How much does it cost for a company to switch to biogas?

Today, there are two main ways to increase the proportion of biogas in your business's gas consumption.

The first option is to use Guarantee of Origin contracts. A guarantee of origin is an electronic document used solely to prove to an end consumer connected to a natural gas network that a specified share or quantity of the energy supplied has been produced from renewable sources. [ 5]‍

Taking out a Garantie d'Originie contract does not guarantee where the gas is manufactured, but it does contribute to the injection of biogas into the grid, and thus to the development of the industry. This option has the advantage of generating no CapEx investment for the company. The cost of a guarantee of origin for biogas is around €15/MWh. [4]

The second option is to use a Power Purchase Agreement (PPA) . A PPA is a medium- to long-term contract (5 to 20 years) signed directly between a biogas producer and a customer. Customers who sign up to a PPA commit to purchasing a given quantity of biogas from an energy supplier, and thus to financing the development of biogas production sites. Biogas production units can be developed directly on a customer's physical site (On-Site PPA) or off-site (Off-Site PPA). PPA customers have access to reliable, certified green energy at a predefined, stable price.

PPAs therefore take longer to set up than the purchase of Guarantees of Origin, but they make a very tangible contribution to the development of a new biomethane production project and thus to a low-carbon economy in the region, notably by securing the commercial outlets for the methane plant financed. PPAs are a reliable way of decarbonizing electricity consumption and contributing to the energy transition.

The cost of a PPA varies according to the local project, but is generally in the range of €50 to €150 hVAT/MWh. [6]

How to make the transition to biogas?

Generally speaking, the decision to switch to biogas for your company should be part of an overall approach to decarbonizing your business and reducing energy consumption.

Whether we're talking about biogas or any other energy transition, it's important to remember that there is no single, predefined answer. There are as many solutions as there are decarbonization projects. The most appropriate solution will therefore above all be the one that suits your context (economic, strategic, regulatory, customer, etc.).

The main stages in the decarbonization of a company's activity are now well known:

Nevertheless, the transition to concrete action and the deployment of actions in the field (such as switching to biogas) are still difficult for many companies, not least because they lack reliable data on the financial impact of their decarbonization levers . Here's a detailed breakdown of the steps involved in building an action plan and implementing it on the ground:

How do you model a financial switch to biogas?

Let's take the example of a company wishing to switch all its production sites in Europe to biogas.

In order to begin transition planning and discussions with stakeholders holding the necessary budgets, the teams in charge will model the impact of this action by basing the financial component on a generic theoretical price per tonne of CO2 saved, say €100/tCO2e.

Local managers are then responsible for contracting local PPAs, obtaining the best possible price . It's a safe bet that prices will vary widely from site to site. Information on the decarbonation potential of each site, combined with the actual price of PPA contracts, provides the group with reliable and accurate information from the field, speeding up concrete discussions and decision-making.

At Traace, our platform is designed to enable companies to take this kind of iterative, pragmatic and realistic approach to financial modeling. Our financial module first models the financial impact of reduction actions, based on business KPIs. Secondly, local operational teams can update pricing information for their perimeter, based on actual quotes obtained from suppliers. The information is then automatically centralized, enabling the teams in charge of planning and financing to accelerate the transition to action.

To find out more about our financial module , click here.


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