Biogas: the economics?

Biogas costs

Biogas screens as a relatively expensive source of energy. Our model of biogas costs requires $20/mcfe gas, a $50/ton CO2 price and a $50/ton tipping fee, in order to make a 10% unlevered return on a $430/Tpa plant.


Biogas is a mixture of methane, CO2, and small quantities of other components, from anaerobic digestion of wet biomass (manure, sewage, agricultural waste).

The economics are actually most sensitive to tipping fees, which are often imposed by regulators, to incentivize biogas projects at more competitive gas and power prices: an expensive tax on consumers, but a kingmaker for biogas projects. Without tipping fees, it would require c$1,500/ton CO2 prices before biogas was cost-competitive.

The aim of our model is to simplify the economics of an anaerobic digestion plant, producing biogas from food and agricultural waste that would otherwise have ended up in landfill. Assumptions can be flexed in rows 5-35. Explanatory notes around costs and economics of biogas are provided in the ‘Notes’ tab.

3 conclusions on the biogas costs are also spelled out in the article sent out to our distribution list. Biogas costs can also be compared to baseline gas cost in different countries. We are more constructive on some of the economic opportunities in landfill gas.

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