Biomethane, often referred to as renewable natural gas or green gas, plays an important role in the European energy landscape. Biomethane is produced through the process of anaerobic fermentation of organic materials. It can be plant waste, slurry, manure, agricultural waste, food waste or sewage sludge. Biomethane is a promising solution for a sustainable energy supply.
The importance of the biomethane market is growing steadily. Especially in countries with strict climate targets and efforts to decarbonize the energy sector. The market is mainly driven by government support measures such as the GHG quota, environmental regulations, and the increasing demand for renewable energy sources. Various technologies, such as the methanisation of hydrogen in combination with CO2 (power-to-gas), offer new opportunities to produce biomethane efficiently and in line with demand.
Price influences
The price of biomethane is strongly influenced by political framework conditions. These can be GHG quotas that encourage the use of renewable energies and thus incentivize investment in biomethane production.
In Germany, biomethane is marketed directly. This can be done on a national scale, by injecting it into the natural gas grid, or on a local scale, by selling it directly to end consumers via their own filling stations. The attractiveness of this trading is largely based on the emission allowances traded. These are derived from greenhouse gas savings and can generate additional revenues.
Biomethane prices reflect these dynamics and can be influenced by subsidy policy, tax benefits and infrastructure development. This makes them a volatile but strategically important element of the energy price landscape.
The price of biomethane produced from advanced waste is influenced by the implementation of the Renewable Energy Directive II (RED II). This directive sets a realistic greenhouse gas reduction value (GHG value) of +10 grams of CO2 equivalent per megajoule (gr CO2eq/MJ). The price of biomethane in May 2024 in a six-year supply contract in Germany was around 12-13 ct/kWh by January 2025, from manure and from waste advanced to 9-10 ct/kWh.
The price also includes the option of double counting of advanced biomethane. This double counting makes it possible for certain types of biomethane produced from waste to be counted twice in RED II for compliance with GHG quotas. This increases the value of biomethane under such contracts.
GHG Quota
The greenhouse gas quota (GHG quota) in Germany indicates the legally prescribed reduction of greenhouse gas emissions. The parties bound by the quota – usually hydrocarbon companies – must comply with it by introducing sustainable biofuels into the market. The baseline for the reduction is the reference value for diesel with 94.1 g CO2 equivalent per megajoule. Instead of focusing solely on the energy quantity of biofuels supplied, as was previously the case, the focus is now on the actual reduction of greenhouse gas emissions.
This reorientation arose from the need to focus the use of biofuels more on reducing greenhouse gas emissions. Thus, in 2015, the GHG quota replaced the biofuel quota. With this innovation, the German Bundestag is limiting the emissions of the oil industry.
Biomethane producers play a key role here. They produce the gas, which serves as a fuel and thus indirectly saves CO2 emissions. The resulting GHG quota is either sold directly to the obligated companies if the producers also act as distributors of the biomethane, or they sell the biomethane to other distributors. The placing on the market or refueling of the biomethane generates this quota.
Production Costs
The production of biomethane is a complex process involving the fermentation of organic materials such as agricultural waste, manure, and other biological feedstocks.
Here, the costs of the raw materials, the technology for fermentation, the processing of the gas produced and the costs for operation and maintenance of the plants must be taken into account.
Operating costs also include energy, water, personnel, and plant maintenance costs. Increased efficiency and technological advances can reduce production costs, but investment costs for plant construction remain an important factor.
Determining selling prices for biomethane from manure in the fuel sector requires a detailed analysis of the cost structure. This is done along the entire value chain and the profitability is analyzed.
Competitiveness
Biomethane is emerging as a crucial component in achieving Europe’s climate and energy goals, offering a sustainable and renewable alternative to natural gas. However, its price and economic viability are strongly influenced by government policies, environmental regulations, and technological developments. The implementation of directives such as RED II and the GHG quota in Germany highlights Europe’s commitment to decarbonization.
As biomethane production technologies improve and infrastructures expand, its competitiveness and attractiveness are likely to increase, cementing it as a viable option for a cleaner and more sustainable energy future.
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