Decarbonisation Technology August 2026 Issue

Feedstock logistics & dispersion Biomass is scattered,

Economic competitiveness & price parity Without carbon pricing or subsidies, biomethane remains costlier than fossil natural gas.

Policy instability & design vulnerabilities Uncertain or short-term policies and subsidy expirations deter long- term investment in

Grid access & technical requirements Biomethane needs upgrading to meet strict gas quality standards and may require costly grid or pipeline upgrades .

Financing gaps & long payback risks High upfront capital needs and long payback periods make projects risky for private investors, especially at early stages.

seasonal , and low in energy density. Collection networks, preprocessing centres , and transportation often account for 30 - 50% of delivered biomass costs.

renewable gas infrastructure.

Key impact High logistics costs limit economies of scale.

Key impact Weak price competitiveness reduces project viability.

Key impact Higher policy risk slows down investment.

Key impact Infrastructure bottlenecks limit integration.

Key impact Limited financing increases cost of capital and delays projects.

Figure 3 Challenges and barriers for biomethane

with 69% of non-household biogas currently leveraged for localised power and thermal generation. In India, the Sustainable Alternative Towards Affordable Transportation (SATAT) initiative has established one of the world’s most structured biomethane (bio-CNG) markets, utilising long-term offtake agreements with state oil marketing companies. Despite abundant agricultural feedstock, industry growth remains constrained by logistical inefficiencies, financing hurdles, and uneven project execution capacity among developers. Challenges and barriers Despite substantial theoretical potential, multiple structural barriers prevent biomethane from scaling effectively relative to its absolute resource base (see Figure 3 ). Although global sustainable potential is estimated at close to 1 trillion cubic metres per year, only a small share is currently economically viable under prevailing market and policy conditions, highlighting a significant gap between theoretical potential and deployable capacity. Technical barriers • Feedstock volatility: Geographically dispersed, seasonal, and chemically heterogeneous biomass input destabilises continuous production and suppresses plant utilisation (IEA, 2025a) .

• Methane slip risk: Operational leaks during processing and distribution undermine life cycle carbon reductions, making advanced mitigation essential (VAMK, 2025) . • Scale disadvantage: Small, modular facilities face elevated unit production costs and lower efficiencies than large integrated plants. Economic barriers Without policy support, biomethane remains economically uncompetitive with conventional natural gas across most markets. The IEA considers that production expenses are highly sensitive to feedstock logistics, with a major portion of total costs tied directly to upstream collection, processing, and transportation (IEA, 2025a) . Furthermore, substantial upfront capital expenditure (Capex) for anaerobic digestion, gas upgrading, and grid injection units creates steep financial entry barriers, especially in developing economies. Consequently, project feasibility relies heavily on diversified revenue models, combining carbon credits, renewable certificates, and guaranteed long-term offtake agreements. • Cost disparity: Uncompetitive with fossil gas unless supported by carbon pricing or subsidies. • Logistical burden: Upstream collection, hauling, and handling dominate the overall cost architecture. • High Capex: Intrepid initial capital