Unlocking New Zealand’s Biomethane Potential

BIOMETHANE VALUE CHAIN

Executive Summary

Anaerobic
Digestion

Unlocking New Zealand’s Biomethane Potential

LandfillGas

Digestate

Pretreatment

Natural gas is a key component of New
Zealand’s energy system; it provides heating tohomes, businesses and powers a large partof our industry. As well as being used forheat, methane is an important feedstock
for some of New Zealand’s largest chemical
processing operations.
Natural gas is both a fossil fuel and greenhouse gas. If New Zealandwishes to fully decarbonise its energy sector then a transition awayfrom natural gas to lower emitting gases will be an essential step.
As discussed in the Climate Change Commission’s (CCC) final advice
report, low emission gases may have a part to play in New Zealand’s

A popular low emission gas overseas that has seen little interest to
date in New Zealand is biomethane; a renewable green methane
substitute produced by biologically digesting organic wastematerials and upgrading the gas produced. It is chemically identicalto natural gas, but over the full biomethane value chain it preventsup to 95% of associated carbon emissions.
This study, conducted by Beca, Firstgas Group, Fonterra andEECA, explores the potential presented by biomethane in NewZealand. While this report is not a response to the CCC, we believe
it outlines a potential pathway and the high level economics
required to evaluate the part biomethane could play in New
Zealand’s energy transition.

Biogas tobiomethaneprocessing

Biofertiliser use on
agricultural landdecarbonisation. The CCC have indicated that the economics andfeasibility of these technologies in a New Zealand context are notwell understood, and more work is required to evaluate what role
they may be able to play.

Food grade CO²

Collection oforganic waste

Industry

Natural gas
network

Industrial
effluent

Municipal
Organic waste

Municipal
Wastewater

ManureCrop Residue

Residential &commericalusers

Why Biomethane?

Unlocking New Zealand’s Biomethane Potential

Biogas

Production and utilisation of biomethane via digestion of organic wastes and processing the raw
biogas creates benefits for gas users, waste generators, asset owners, their communities
and the environment.
Diverting organic wastes from landfills or other end locations
to anaerobic digestion decreases associated biogenic
emissions for that waste by up to 95%. The methane
captured from the waste being processed in an anaerobic
digester can then be treated and used to offset fossil fuelconsumption, which more than doubles thecarbon savings.
A positive upside for boiler operators is the chance to use
upgraded biomethane as a drop-in replacement for their natural
gas with none of the emissions. This provides an invaluable
opportunity to decarbonise their energy use without needing to
make any changes to their onsite assets.
Key differentiators between biogas and biomethane generationand other popular renewable fuel sources is the creation ofother valuable by-products through the biomethane value
chain. The creation of valuable products like digestate andgreen CO² bolster the financial and environmental
benefits of biomethane production, and combined withthe capture of biogenic emissions more than double thetotal emissions avoided throughout the product lifecycle.

“The methane captured fromthe waste being processed in
an anaerobic digester can thenbe treated and used to offset
fossil fuel consumption, whichmore than doubles thecarbon savings”.

Biogas and Biomethane:

Technologies andUse Internationally

Biomethane

CO²Digestate
Organic Waste

CARBONBALANCEAD Plant

CAPTURED BIOGENICWASTE EMISSIONS

Biomethane Plant

FarmlandEMISSIONS FROMPROCESSING WASTE

CARBON SEQUESTEREDBY DIGESTATE

Homes

Industry

CARBON SAVED
USING GREEN CO ²CARBON SAVED BY
USING RENEWABLE
BIOMETHANE FUELTOTALEMISSIONS
Total
Emissions

EMISSIONS
Total
avoidedEmissions
EMISSIONSAVOIDED

19x Total
EmissionsBiogas can be created by anaerobic digestionof many types of high-energy organic wastes,such as:• Food wastes;• Animal manures;• Wastewater treatment sludges;• Crop residues; and• Industrial effluents with lots of		 dissolved organic material.

Biogas can also be collected from landfills that receive organic
wastes – this gas is very similar to biogas but contains othercontaminants from non-organic material in the landfills. One ofthe differences between biogas creation via anaerobic digestion(AD) and collection of landfill gas is the creation of a solid

residue called digestate, a processed and inert material
that can be used as a fertiliser supplement.
After biogas has been created, it can either be used for directenergy or cleaned and refined into biomethane. This process
enables the gas to be injected into natural gas networks,transported and used as a direct substitute for naturalgas.
Internationally, biogas and biomethane have been
identified as key mechanisms for decarbonisation andenergy independency in a number of countries. Denmark
is currently using biomethane to supply 20% of its naturalgas grid, with a goal to completely displace its fossil-methane
consumption with biomethane by 2050. Other countries arealso committing to legally-binding biomethane grid injection
targets, like France which in 2015 set a target to rapidly expand
its biomethane production and reach 10% biomethane in its
grid by 2030
Commercially, biomethane is becoming an important part ofthe development strategies for many large international oiland gas companies. Companies like Total and Chevron areinvesting in biomethane projects to support developmentof new biofuel technologies and enable a transition togreener fuels.

Category

The Size of The BiogasPrize in New Zealand

Municipal Waste

Industrial Wastewater**

We have reviewed available quantities of feedstocks in New
Zealand to understand the maximum achievable biogas
generation with existing waste streams.

Agricultural Waste

The only key feedstock popular overseas that we did not consider a large contributor to
New Zealand’s possible biomethane future is the use of purpose-grown biomass or energy
crops for biogas generation, as energy crops are not an established agricultural productin New Zealand and are unlikely to take off in New Zealand given our already highlyproductive agricultural sector occupying the majority of available land for energy crops.

Feedstock Type

Biogas Potential (PJ/year)

Municipal Wastewater solids

0.6 to 0.9

Source-Segregated Food Waste

1.5

Dairy

1.1 to 1.9

Meat0.7

Pulp and Paper

0.6

Dairy Manure

6.8

Pig Manure

0.4

Poultry Manure

1.3

Crop Residue

1.4 to 2.9
Total

Landfill Gas

12.6 to 16.9 PJ

Existing Landfill Gas Capture

315.6 to 19.9 PJ

Total

Our estimates indicate that implementation of wide-scale anaerobic digestion in NewZealand could produce between 13 and 17 PJ of biogas energy per year, as well as large
quantities of CO² and digestate as valuable by-products. This estimate excludes current
biogas generation via landfills (around 3 PJ), which may decrease over time as a result ofdiverting food waste to AD facilities.

These figures are based on a set of assumptions around achievable collection of different feedstocks in a New Zealandcontext, typical conversion rates and technical limitations on processing different waste streams.

The most significant sources of biogas identified in our analysis were Dairy
Manure (5-6.8 PJ), Dairy and Meat Industry Effluents (2.6 PJ) and SourceSegregated Food Waste (1.5 PJ).

Implementation of Biomethane+ Uptake Towards 2050

Achievable Today

Less Favourable orMore Competition

Vision to 2050

Landfill Gas

0.36

1.44

2.52

Crop Residues

0.145

0.87

1.45
2.56

Biomethane Potential Over Time
Industrial Effluent

0.48

Today in New Zealand biogas andbiomethane are not part of the main
zero-carbon energy conversation, andthis has meant that biogas has beenchampioned by only a few privatecompanies and experts in the field.
To date, the majority of New Zealand’s biogas generation
has been from wastewater treatment plants (WWTPs),a few private companies like Fonterra (at their Tirau andDarfield sites), small piggeries and from landfill gas capture
operations. None of these operations currently upgrade theirbiogas to biomethane.
Our analysis shows that digestion plants producing
biomethane can become profitable today if supported
by charging a gate fee for reception of wastes as well
as also selling CO² and digestate as a by-product.

We estimate that a biomethane sale price similar to current
natural gas prices could allow up to 1.6 PJ to be made using
readily available feedstocks.
A further 5.6 PJ would become available in coming decades as
natural gas prices increase above $35 /GJ, driven by Emissions
Trading Scheme (ETS) price rises and natural gas scarcity.
Out to 2050, 13 PJ could become available as hard-to-utilise
feedstocks like animal manure and crop residue, which don’t
stack up economically today, become viable at biomethane
prices of $50-60 /GJ. These high prices help to provide
revenue for new plants that cannot charge a gate fee or
maximise their digestate value.
Separate from these totals, large percentages of our identified
feedstocks can be used for small-scale biogas generation forheating or Combined Heat and Power (CHP). Small-scale onfarm digesters or digesters at small industrial sites can still be
used to reduce emissions and create clean energy at scales
where biomethane creation and injection to the natural gas
pipeline is too difficult.

Biomethane Yield Potential (PJ)

141.6

Achievable Today

Less Favourable orMore Competition

Vision to 2050

Food Waste

0.60.9

1.2Solids

00.69

0.84

Animal Manure

01.676

4.396

Available Biomethane
at $50-60/GJ

12108

Available Biomethane
at $35-40/GJ

64Readily - Available
Biomethane

222020

Animal Manure

2030

WWTP Solids

Food Waste

2050

2040

Industrial Effluent

Crop Residues

Landfill Gas

Barriers to Maximising
Biomethane and How They
Can be Overcome
Biogas and biomethane are well-establishedoverseas, but the technology has not experienced
the same success in New Zealand.
New Zealand’s low landfill taxes mean that it is easier and moreconvenient to simply send organic waste to landfill, whereas overseas
high landfill taxes, bans on organic materials to landfill and moreregenerative and circular approaches to waste management havecreated demand for alternative technologies like anaerobic
digestion. Promotion of more circular economies for all kinds ofwaste in New Zealand would create a more sustainable approach
to waste management and allow a more regenerative economy todevelop. Coordinating separate waste collection for suitable organicwastes can also be a logistical barrier to building the case for a largescale plant, especially if the individual wastes are all different
in composition.

“Promotion of more circular
economies for all kinds of waste
in New Zealand would create amore sustainable approach towaste management and allow amore regenerative economy
to develop.”
One of the key differences between New Zealand and othercountries overseas is the lack of green gas and high-quality digestatecertification systems locally. Overseas, companies can sell thebiomethane they generate as a premium product, supported by
the trading of green gas credits which can benefit purchasers
in their emissions reporting etc. Additionally, digestate created byprocessing clean organic wastes can be certified and sold as a fertiliser
supplement for use in agriculture. In particular, digestate represents
a large value stream that should be monetised, but requires support
to realise its full value and address the barriers affecting its uptake in
New Zealand. If not enabled, the loss of potential revenue fromdigestate can significantly affect the profitability of biogas andbiomethane generation.
These two schemes support additional revenue generation of biogas
and biomethane plants, boosting profitability and returns for investors,and also create additional ways for these plants to support New
Zealand’s other primary industries. It is promising to see Certified
Energy and the Bioenergy Association’s recent steps to publish draft
proposals for these schemes in recent months, and suggests thisbarrier may be removed in the near future.
Financially, countries that have experienced the fastest and mosttransformative uptakes in biogas and biomethane production havebeen supported by central government via green investment schemes,
guaranteed Feed-In Tariffs and further taxes on top of ETS schemes
for producers of fossil fuels/heavy emitters of GHGs. This helps makealternative biofuels more cost-comparative with incumbent fossil
fuels in the early stages of investment, as markets develop and adjust
to these new fuels and particularly other by-products of bigas andbiomethane processing.

Collaboration is Key:
Next Steps Towards a
Zero Carbon FutureThis study has demonstrated that biogas andbiomethane are significant, untappedenergy resources in New Zealand, and havethe potential to play a significant role in thedecarbonisation of New Zealand’s natural
gas network.
Using existing and available organic wastes in New Zealand, up
to 7-8% of New Zealand’s natural gas demand could be
met with biomethane which would reduce New Zealand’s
annual emissions by 2%. Biomethane can perform just as well as
alternatives to traditional natural gas like hydrogen and electricity toprovide heat and can also be used as a chemical replacement for fossil
methane feedstocks to chemical processes.
Successful uptake of biomethane in New Zealand will not happen
overnight, and will require cooperation across industries, communities
and both the private and public sector to reach its full potential.
We are excited about the role that biogas and biomethane canplay in New Zealand’s energy transition, and continuing theconversations generated by this study.

The study partners EECA, Beca, Fonterra and Firstgas Groupwould like to acknowledge and thank our technical partners
who contributed their knowledge to this study:• Lion NZ Ltd, for their expertise on biogas and anaerobic 				 digestion as a Technical Study Partner,• The Bioenergy Association of New Zealand, for their 				 feedback and support of the study,• Insa Errey from Curios Ltd, and Richard Bartlett 				from Biogrid Consulting Ltd for sharing their		 knowledge and experience.