Earlier this month, the Government released its 36-point action plan, to be completed by the end of June. This plan includes taking decisions on the removal of the ban on offshore oil and gas exploration.

Repealing the ban, in place since 2018, is seen by some as closing the gate after the horse has bolted. New Zealand’s dwindling gas supplies have been widely reported; according to the Gas Industry Co’s (GIC’s) Briefing to Incoming Minister of Resources (BIM), natural gas production will be insufficient to meet demand between 2025 and 2027 and low investment confidence is affecting field development. Nonetheless, the CCC’s draft advice on the fourth emissions budget, released this month, sees “small amounts” of fossil (i.e., natural) gas electricity playing a supporting role for security of supply out to 2050.[1]

In its 2023 Gas Transition Plan issues paper, the Ministry of Business, Innovation & Employment (MBIE) considered the opportunities to transition away from fossil gas at a pace that ensures risks are managed. Opportunities canvassed included hydrogen, carbon capture utilisation and storage, and biogas. With biogas in the news of late, we’ve taken a closer look at the opportunity it presents.

Biogas integration

Biogas is a mixture of methane, carbon dioxide, and other gases produced through anaerobic digestion of organic matter. “Biogas integration” involves blending biomethane into existing fossil gas pipelines so that consumers would be burning a mixture of fossil gas and biomethane. As biomethane is chemically identical to fossil gas, consumers would not notice anything different about their gas supply and existing appliances could continue to be used unmodified.

Potential in New Zealand

There are differing views as to the potential of biogas integration in New Zealand.

MBIE’s Gas Transition Plan issues paper stated that the timing and scale of the biogas opportunity to offset fossil gas use was uncertain but promising.[2] Biomethane blending could provide a low emissions option for consumers who are willing to pay a premium to continue using pipeline gas and could smooth the rate of change and associated impacts on electricity networks. However, it was not expected to win out over commercial and residential electrification in the long term.[3]

In its BIM, the GIC says that opportunities are available today to decarbonise more of the gas sector through biomethane. The GIC sees biogas as a long-term solution for decarbonising residential and small commercial gas, which are a minor part of the gas market albeit the largest by consumer numbers. However, a biogas market needs to develop, which would be unlikely if new gas connections were banned.[4]

The CCC appears less enthusiastic about the potential for biogas.[5] Its 2023 advice on the second emissions reduction plan made no formal recommendations regarding biogas, although it did note that the Government should assess the future role and cost of low emission gases. Under the draft EB4 demonstration path[6], fossil gas would be phased out in all buildings by 2050. The CCC chose not to include biogas integration in its pathway, saying “it is not clear that a sufficient quantity of biogas will be available at a price point that would make it competitive with electricity as a decarbonisation solution”.[7] The CCC also discounted the potential of replacing (or blending) fossil fuel with biogas to decarbonise the production of methanol.

Currently most of the biogas being produced in New Zealand is being flared, and therefore not used in a way to reduce our emissions. So, is there an immediate opportunity to use what we already have, in a better way, and then build on that? Others in the industry think so.

• A report commissioned by Clarus, PowerCo and Ecogas in 2023[8] suggests biogas can offer crucial support to narrow the gaps in New Zealand’s waste, emissions and energy targets, providing a means of diverting waste away from landfill, supplying reliable renewable energy, and creating value for businesses across industry and agriculture.
• Clarus company, First Renewables, is nearing completion on a plant that will convert biogas from Ecogas’ organics processing facility at Reporoa into biomethane. The biomethane will then be injected into the gas network for residential and industrial supply – estimated to generate enough energy for the equivalent of around 7,200 households in the region per year.
• PowerCo has also announced two projects to assess the viability of turning biogas that would otherwise be flared into renewable gas that can flow through its pipelines.
• The pan-industry group FutureSure is confident that the industry can transform waste from a problem to an energy solution and recommends keeping all types of green gases as options on the table.
• BraveTrace (formerly Certified Energy) has recently announced that it will soon launch a biogas certificate, also signalling that it considers biomethane a growth market.

There may be some momentum building.

Taking stock of the above, we think biogas has a role to play in New Zealand’s decarbonisation journey. We don’t think it will be front and centre but perhaps one that supports the increase in electrification from the sidelines, by helping to shore up reliability of supply. Please get in touch with one of our energy experts if you would like to know more.

Footnotes

1. 20240403-EB4-draft-advice-P05-V01-compressed.pdf (climatecommission.govt.nz), p.87
2. Gas Transition Plan issues paper (mbie.govt.nz), p.10
3. ibid, p.31.
4. Recommendation 15 in the Climate Change Commission’s Advice on the direction of policy for the Government’s second emissions reduction plan is “to prevent the installation of new fossil gas infrastructure and connections in buildings except where there are no technically viable low emissions alternatives”.
5. 2023 Advice on the direction of policy for the Government’s second emissions reduction plan, p.274
6. For meeting the draft fourth emissions budget.
7. 20240403-EB4-draft-advice-P05-V01-compressed.pdf (climatecommission.govt.nz), p.88
8. Vision for biogas in Aotearoa New Zealand (powerco.co.nz)