Biomethane unlikely to supply quarter of global gas demand

High costs and weak policies limit renewable gas adoption.

Biogas and biomethane are emerging as potential cornerstones of Southeast Asia’s energy transition, but cost barriers and weak policy frameworks continue to weigh on the sector’s growth. According to the International Energy Agency (IEA), biomethane could meet a quarter of today’s global gas demand, equivalent to 1 trillion cubic meters. Yet current adoption is a fraction of that.

“Today, only 0.2% of natural gas demand is coming from biomethane. In France, 3% as of early this year, and the country has set a target of 10% by 2030,” said Dieter Billen, Partner and Head of Energy & Sustainability Practice for South-East Asia at Roland Berger. “Honestly, I don't think that it will meet the 25% global gas demand despite biomethane potential, and the reason is cost.”

Billen stressed that biomethane remains “significantly more expensive than natural gas” in most markets. Without carbon pricing mechanisms, natural gas will remain cheaper due to economies of scale. “Although I'm very optimistic about the potential of biomethane, I don't think we'll reach 25% unless there are very strong policy interventions like carbon taxes,” he said. The cost challenge is stark: meeting the IEA’s 25% potential would require “around $250 billion extra every year.”

Policy support and security-of-supply concerns drive much of the current willingness to pay for renewable gases. India, for example, has a mandate for transport fuel and domestic pipe gas, starting at 1% and rising to 5%. In Southeast Asia, however, willingness to pay remains limited.

“There are support measures in the region for biogas, typically in the form of a feed in tariff, but not so much for biomethane yet,” Billen explained. He identified only two short-term demand drivers: “One is the power sector, especially in Singapore, and the other one is the maritime sector for bunkering via bio LNG.”

Singapore is set to anchor Southeast Asia’s biomethane market. “Most of the demand for biomethane in the region will come from the power sector in Singapore, namely, gas based power plants, which is 95% of Singapore's power mix,” Billen said. Power producers are negotiating import volumes to blend biomethane into their systems, creating renewable electricity highly valued by energy-hungry data centers.

“The biggest developments will be the creation of a new biomethane market, driven by Singapore, with cross border biomethane flows. And this is really exciting, as it's a completely new market development with investment opportunities on the feedstock production and transport side,” Billen concluded.