March 31, 2025
Biogas produced from organic matter is playing an increasing role in providing green heat and power for homes and industry.
Investors like biogas as it generates high returns and can burnish their green credentials. It serves the same purpose as fossil-fuel natural gas, but is carbon-neutral (or carbon-negative) because it’s produced from organic matter that was part of the natural carbon cycle, so doesn’t add new carbon to the atmosphere.
High-calorific biogas is produced from solid waste from poultry, cattle, pigs and farmed fish, and even fish morts (corpses), then either pumped into the grid, or used to power electricity-producing turbines.
Conversion is achieved either by anaerobic digestion (AD), where microorganisms are broken down to produce a mix of methane and carbon dioxide used to generate heat, electricity, or transport fuels, or by biomass gasification, where semi-dry food waste is transformed by hot substances into energy-rich synthetic gas (‘syngas’) – used to generate heat and power.
Food waste used for biogas includes not just out-of-date produce from supermarket shelves but also fruit and vegetables, cooking oils and fats and slurry from cheese production – even discarded soft drinks.
Infrastructure investors are piling into the sector to fill a gap left by traditional lenders – banks spurn food waste as feedstock as much of it is produced by mistake, so can’t be viewed as a reliable revenue source. Yet mistakes are inevitable, and aggregating them across the economy or over time brings consistency, combined with high returns – a win-win for specialist investors.
It’s unpredictable so it’s shouldn’t work, but the ‘aggregation effect’ is now built into the system, yielding big returns for investors.
In one case, a large shipment of soft drink bottles was rendered unsellable by a typographical error. Pouring out and rebottling tonnes of fizz was impractical and changing thousands of labels uneconomic, so the pallets were loaded up and went to making gas.
Food manufacturers often overproduce to counter the risk of shortage. In the event of unexpected rain, hamburgers and sausages ordered by supermarkets for a weekend of summer BBQs will be diverted straight to AD plants. This provides revenues from biogas production and saves on transport and storage costs.
Both the UK and EU long relied heavily on natural gas, most of it imported, to heat buildings and generate electricity, until Russia’s 2022 invasion of Ukraine dramatically highlighted the risk of reliance on foreign supply. Now it’s not only investors who are looking to biogas as at least a partial replacement.
In 2023, the EU and UK consumed 295 billion cubic metres (‘bcm’) and 63.5bcm of natural gas respectively, a fall of 15.7% and 10.4% in turn on the previous year, due to factors including demand reduction efforts, efficiency improvements, renewables, and securing gas from alternative sources such as biogas.
Comprising about 60% methane and 40% carbon dioxide, biogas is produced by anaerobic digestion – breaking down organic matter in a digester without oxygen. It can be used for heating, electricity and replacing natural gas in vehicles.
Even bigger environmental benefits come when biogas in purified to produce biomethane by removing carbon dioxide, hydrogen sulphide and water. Similar to natural gas, biomethane is used for heat and power in buildings and industry, and as a renewable transport fuel. The gas is produced from methane that would otherwise escape landfills, and burning biomethane converts it to CO2 – a far less potent greenhouse gas.
For the UK and the West, replacing natural gas with biomethane in the gas network would speed grid decarbonisation, stabilise and soon lower cost, and boost energy security and independence.
If you’re involved in any aspect of the biogas or wider renewable energy value chain, you’re welcome to get in touch for a chat. We love energy.
*Allerton Communications: Great ideas. Stand-out stories. Better outcomes.
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