Biogas Council Discussion: Earnings and Durability in Biogas by Selling Byproducts
Sergey Buchin is the head honcho and boss hog of IRBISIO Cleantech Infrastructure Fund's operation.
Although biogas creation has some positive environmental effects, it still primarily relies on handouts to stay afloat financially. I believe that long-term economic sustainability for this industry can be achieved only if every biogas project takes full advantage of all available byproducts.
This approach not only brings in extra cash but also helps in achieving worldwide climate objectives by making biogas production in line with circular economy principles.
Unlike the common linear model of "take, make, dispose," a circular economy concentrates on reducing waste and maximizing resource usage, keeping materials in circulation as long as possible. I see potential for biogas production to demonstrate these principles, offering both environmental and financial advantages.
The Environmental Case for Biogas Production
As the world's population continues to grow, so does the volume of trash. According to the World Bank, solid waste volumes are expected to increase by about 70% by 2050. In the U.S., factory farms are home to around 1.7 billion animals, a number that has grown by 47% since 2002. These animals produce 940 billion pounds of manure each year, surpassing the sewage output of the entire U.S. population.
If not properly handled, organic waste contributes considerably to greenhouse gas emissions, particularly methane, which is over 25 times more potent than CO2. I believe that biogas production can offer an effective solution, converting organic waste into valuable energy, reducing methane emissions, and supporting sustainable agricultural practices.
However, to reduce dependence on subsidies, the biogas industry must capitalize fully on its byproducts, including carbon dioxide (CO2), digestate, biochar, and heat. Each has unique qualities, uses, and market potential, providing a lucrative opportunity for companies that are innovative and invest in these areas.
Key Byproducts and Their Market Potential
Carbon Dioxide (CO2)
I find that biogenic CO2, a renewable byproduct of biogas, has untapped market potential as a sustainable alternative to fossil CO2. It is used in various industries, including beverage carbonation, greenhouse agriculture, and industrial processes like refrigeration and welding.
Though its potential is immense, biogenic CO2 is largely underutilized. Europe has led the way in biogas production, with 18 billion cubic meters produced in 2020, projected to reach an astounding 35 billion cubic meters by 2030, equal to 10% of the European Union's natural gas consumption. Europe's example demonstrates that capturing and monetizing this CO2 provides an efficient and financially rewarding pathway for the biogas sector.
Regulatory encouragement for CO2 capture and utilization is essential. For instance, the European Commission is drafting a regulatory framework that incentivizes environmental contributions from CO2 capture. In the U.S., the Department of Energy has launched a carbon dioxide removal (CDR) purchasing program, investing $1.2 million in 24 projects to advance carbon removal technologies, reflecting the government's interest in carbon management as an economic driver.
Digestate
Digestate, the nutrient-rich residue left after anaerobic digestion, serves as a potent organic fertilizer, offering an eco-friendly alternative to synthetic fertilizers. Rich in nitrogen, phosphorus and potassium, digestate provides plant nutrients that are easily absorbable and gradually release into the soil, promoting healthier crops and reducing nutrient leaching.
According to the European Biogas Association, using digestate instead of synthetic fertilizers can significantly reduce greenhouse gas emissions, save fossil resources, and decrease water usage.
However, like biogenic CO2, digestate remains underutilized due to limited market development and awareness. In the U.K., Publicly Available Specification (PAS 110) certifies the quality of digestate, and similar standards across markets could help boost its usage.
The European Council is also considering revisions to the Nitrates Directive, which would support new farming methods, including those that utilize digestate as a sustainable fertilization method.
Heat
Biogas primarily comprises methane (CH4) and carbon dioxide (CO2). When combusted, biogas yields significant amounts of heat that can be utilized in various industrial and agricultural applications.
Heat from biogas combustion is also captured in combined heat and power (CHP) systems, where it is burned in a turbine or engine to generate both electricity and heat. CHP systems offer energy efficiency by producing both heat and electricity from a single fuel source and are widely used for district heating, industrial processes, and greenhouse heating.
Direct utilization of heat from biogas is financially viable, especially in industrial settings where biogas can be co-fired with other fuels. While CHP systems require more significant investment, they can significantly boost overall energy efficiency and sustainability in biogas operations.
Setting the Stage for a Circular Economy
To maximize its environmental and financial potential, the biogas industry must embrace circular economy principles - recognizing the value of byproducts like CO2, digestate, and heat, and establishing the necessary market infrastructure to monetize them. Regulatory incentives that reward environmental benefits also support this transformation, reducing waste, cutting carbon emissions, and creating new revenue streams for the biogas sector.
Business leaders should look to target voluntary markets where climate-conscious companies are prepared to pay premiums for sustainable alternatives. By fully utilizing byproducts like CO2, digestate, and heat, biogas companies can create diversified revenue streams and reduce financial dependence on subsidies.
In developing regions, biogas businesses can leverage local cost advantages and partner with climate-conscious companies from developed markets. Sourcing local suppliers for construction and equipment can also reduce capital costs, making projects more financially feasible despite limited infrastructure or regulatory uncertainty.
Embracing the pace of change in a fast-evolving sector necessitates promoting a creative environment. I've noticed that getting involved in industry alliances, like the American Biogas Alliance or the European Biogas Alliance, offers significant insights into proven methods, cutting-edge tech, and forthcoming regulatory tendencies.
In the long term, reliable contracts and public-private collaborations are vital for assuring consistent income and attracting investments. Projects with predictable income can secure low-cost lending, which, according to my experience, often takes care of 50% to 75% of the financial needs. This subsequently ensures dependable profits that entice investors.
Transitioning Towards Sustainability
Individuals operating in budding biogas markets have the power to establish regulatory structures that advance sustainable manufacturing. The right regulations and infrastructure could convert the biogas industry from a subsidy-reliant one into an autonomous, profitable force driving global climate goals.
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Sergey Buchin, as the head of IRBISIO Cleantech Infrastructure Fund's operation, could explore partnerships with companies in the biogas industry to maximize the utilization of their byproducts, such as CO2 and digestate.
With Sergey Buchin's guidance, IRBISIO could invest in countries with developing biogas markets, such as those in developing regions, to leverage local cost advantages and support climate-conscious initiatives.
