Distributed Biogas: $11.8 Billion Market Hidden in Plain Sight

Rhe mountains of bureaucratic red tape involved in urban food waste biogas projects, where this hidden $11.8 billion market lies, can be easily avoided or greatly reduced by smaller, decentralized biogas plants.
By Warren Weisman | September 21, 2016

Every year in the U.S., 37 million tons of food waste are sent to landfills—the equivalent of 514 Nimitz-class aircraft carriers. At Seattle’s $125-per-ton tipping fee, this waste would amount to $4.6 billion annually. If used for biogas production, at 4,200 cubic feet per ton, this same amount of waste could power five million homes for an entire year. Unlike intermittent solar panels and wind turbines, biogas is available anytime day or night, rain or shine, and since biogas can be stored in a gas form until needed, it does not require external storage, such as batteries.

Since 2008, government incentives for solar have averaged $39 billion per year, while less than $10 million total has gone to biogas since 2008. This $195 billion increased PV solar capacity from 0.02 percent to 4.2 percent of renewable electric from 2008-'15, an increase from 0.0 to 0.6 percent of total U.S. electricity. Had this $195 billion instead gone to purchasing 19,500 $10 million-dollar biogas plants, instead of a net decrease in biomass electric output from 14 percent in 2008 to 11.68 percent in 2015, it could have potentially increased the percent of American renewable electricity from biomass to 34 percent. It would be providing 4 percent of total U.S. electricity with around-the-clock energy that is not weather-, time- or day-dependent.

When examining America’s potential biogas future, one should look at Europe. While biogas remains highly obscure in the U.S., the European market has grown exponentially since the 1990s, driven primarily by the European carbon trading system established following the 1992 Kyoto Protocol, together with instability of natural gas prices in Eastern Europe and Scandinavia following the collapse of the Soviet Union. Over this period, Germany has emerged as the world’s first major renewable energy economy, with an estimated 8,500 biogas plants, compared to 2,000 in the U.S. Renewable energy in Germany has grown from 6.3 percent of total energy to 30 percent between 2000 and 2014. Biomass, including biogas and direct burning and gasification, accounts for 30 percent of renewable electric and 70 percent of Germany’s total renewable energy.

 Germany’s ambitious biogas program has been driven by five important factors: widespread public support and government incentives for biogas, carbon credits, high electricity rates, established market for plant byproducts among farm community, and a large number of skilled biogas workers. These factors have contributed to the profitability of biogas projects in Germany, and given German public officials and permitting agencies the confidence to approve and promote future biogas projects. European carbon credits have averaged €10 ($11.15) per metric ton since trading began in 2005, and at times trading above €30 per metric ton. The European carbon credit system was devised for solar panels, and became a cash cow for biogas plants producing orders of magnitude more power 24/7, making biogas plants highly attractive investments. Even at €10 per metric ton, for example, a biogas plant in Europe processing 80 tons per day and generating 750,000 cubic feet of biogas per day, could be eligible for over $5 million worth of fossil carbon per year. This potentially allows $10 million to $15 million biogas plants in Germany to pay for themselves in two to three years. The same plant in the U.S. would require decades to pay for itself, much less become profitable to owners and investors.

Unlike most European countries, the U.S. did not sign onto the U.N.’s 1992 Kyoto Protocol. The short-lived Chicago Climate Exchange (CCX) was America’s only attempt at carbon trading, and ceased trading in 2010, after carbon prices hovered at 10 cents per ton for almost a year. The CCX achieved its highest price, $7.40 per ton in 2008, coinciding with the release of An Inconvenient Truth. A film that incidentally makes no mention of biogas, even though the carbon in biogas—the C in the CH4—is biogenic carbon, part of the Earth’s natural biosphere and can replace fossil carbon Btu-for-Btu. Humans exhale biogenic carbon every few seconds. 

One potential revenue stream where the German and U.S. biogas markets coincide, is landfill tipping fees, which have been rising across the nation an average of $2 per year since 1995. Some select cities, such as San Francisco and Seattle, have exceeded $100 per ton for waste disposal and implemented ambitious organics diversion programs. 

Many European biogas providers have opened offices in the U.S. in preparation for anticipated demand, however, they continue to attempt to force large, centralized biogas plants through the square hole of an American public that has never heard of biogas, much less understand its benefits. The European biogas model fails to take into account the fundamental realities in the U.S., where there are none of the major economic advantages to biogas in Europe.

One of the most persistent myths in the biogas industry, perpetuated by European biogas providers doing business in the U.S. is that biogas plants are only economical at a certain scale. In the U.S., this claim is backwards. The microorganisms that produce biogas do not care what size tank they are in, and the conditions inside a 15,000-gallon fermentation tank are far easier to control than a 1 million-gallon tank. 

Decentralized biogas takes this simple, natural process out of the hands of farm and dairy owners, and municipal wastewater treatment plant managers, and could potentially place it in the hands of thousands of large and mid-size businesses in urban environments to increase avoided costs. The above table represents the total addressable market for 1-ton per day food waste biodigesters in urban environments with a base price of $325,000.  In cities with high electric and waste disposal rates, such as Seattle or San Francisco, such a system could potentially pay for itself in less than 10 years. This payback period does not exceed ten years anywhere in the U.S., and will decrease as landfill.

The European large-scale biogas model has become a box canyon in America, where there are few public financial resources available to biogas projects and businesses. Smaller, on-site biogas plants sold business-to-business that limit the number of stakeholders and minimize government involvement are a more appropriate choice for American urban waste-to-energy projects. Continuing to ignore the great diversity of America and American businesses, and continuing the attempt to replicate the European model will only result in more high-profile financial failures of biogas plants, and further complicate the already Herculean task of spreading accurate information about biogas throughout the U.S.

It is not the intent of this article to imply there should not be any large-scale biogas projects in the U.S., or in any way minimize the excellent work of those in large-scale biogas. Of course, there will always be many projects that lend themselves to centralized biogas plants. But the mountains of bureaucratic red tape involved in urban food waste biogas projects, where this hidden $11.8 billion market lies, can be easily avoided or greatly reduced by smaller, decentralized biogas plants. Attempting to recreate European biogas success on this side of the pond is what has left American biogas technology decades behind the rest of the world.

Authors: Warren Weisman
CEO, American Future Energy