Cleantech Market Intelligence
Biomethane Shows Market Promise, at Least in Europe
Europe is leading the world in production of biomethane vehicles, which run on methane generated from digesters of waste products. Germany has jumped into the market in a big way, with Hamburg Wasser shifting its fleet of vehicles to run on biomethane and the opening of the 100th all-biomethane refueling station. Biomethane (also called biogas or renewable methane) is often mentioned as a way to move to CO2-neutral driving. The German energy agency, DENA, found that mixing 20% biomethane has the possibility of reducing GHG emissions by up to 39% over gasoline and 36% over new clean diesels, and that using 100% biomethane would be as clean as driving an electric car using 100% wind electricity generation.
Well-to-Wheel Greenhouse Gas Emissions for Various Fuel
(Source: DENA German Energy Agency GmbH)
A new study from Dr. Frank Rijnsoever of Utrecht University in the Netherlands shows that Netherland government fleet managers will value biomethane-fueled vehicles as much as electric vehicles. The research shows that fleet managers are willing to pay a premium for both biomethane and electric vehicles over traditional gasoline vehicles. However, similar to what we see here in the the United States, the lack of refueling infrastructure for biomethane limits interest.
Interest in biomethane is particularly strong in Northern Europe (the Nordic countries, the Netherlands, and Germany). However, the overall market for natural gas vehicles in these countries remains small in comparison to Western Europe’s largest market, Italy, with 159,578 NGV sales anticipated this year, compared to 29,849 in Sweden, the second largest market in Western Europe. While Italy is in the throes of sorting out the biomethane industy, Sweden has a strong market for biomethane, with about 58% of NG used for transportation coming from biomethane in 2008 (latest data available).
In the United States, biomethane remains a very small part of the overall gas market. As a transportation fuel it’s almost entirely relegated to fueling garbage trucks and a few other demonstration fleets. That may change in time, as the California Air Resources Board has published a proposal for a new Low Carbon Fuel Standard (LCFS), which includes a “pathway” to biomethane production. This was followed by the announcement that three companies have been selected by the California Energy Commission to receive grants for biomethane production. Whether these grants will ultimately be awarded is still very much up in the air, but the momentum is growing.
If emissions were the deciding factor then biomethane would be the clear, hands-down, winner. However, production costs of biomethane range from $5.90 to $9.00 per million British thermal units (MMBtu), according to Calstart, for midsize to small production facilities. Non-renewable natural gas is very cheap at the moment ($3.43/MMBtu), so the economic motivation is not there. This will relegate the biomethane market to small projects targeted at specific fleets or geographic areas. This, combined with the small size of the NGV market in the United States (20,381 vehicles in 2012), makes it hard to see biomethane having a significant impact on the U.S. transportation market. For the foreseeable future, most biomethane investment will remain focused in Europe.