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Synthetic Methane: Green Idealism versus Economic Reality

Synthetic methane is an emotionally appealing idea that has never made a lot of economic sense. The appeal is simple: Recapitulate existing natural gas fuel using nothing more than captured CO2, water, and renewable energy. It's green, it's net zero, and it is backwards compatible with the world's existing stock of gas-fired capital equipment. It seems more likely that we can quickly spool up centralized methane synthesis than work through the world's equipment piece by piece, changing one at a time.


The economics are tougher. It's thermodynamically inefficient to convert renewables into methane. We use the renewables to make hydrogen, then hydrogen to make methane and we lose energy at each step in the process. And while we get to preserve our existing methane-burning equipment, the new required electrolysis equipment will be a pretty penny as well.


How expensive would it be? As an example, in the 2021 paper, Liquefied synthetic methane from ambient CO2and renewable H2 - A technoeconomic study, researchers looked at the future pricing of synthetic methane in a scaled system, and found a price of $30/GJ in the short term, dropping towards $20/GJ beyond 2030. Of this price, about $5-6/GJ comes from the energy and capex associated with direct air capture (at $120/ton, a reasonable long-term target), with the bulk of the cost in the production and consumption of hydrogen in making the methane. The cost of hydrogen matters more than any other process


This $20-30/GJ compares to about $2.30/GJ today for fossil gas in the US, or $10 GJ in Europe. (European gas prices are not likely to stay this high; they had spiked up to $30/GJ after Russia's invasion of Ukraine, and have not fully returned to their pre-war prices.) There is a case to be made that fossil gas prices will inevitably rise with a future carbon tax, but the gap will remain large: A carbon price of $100/ton will raise the price of fossil gas another $5.85. This places the cost of fossil gas coupled with its own direct air capture to clean its emissions in the range of $10/ton long term, still $10-20/GJ cheaper than synthetic gas. With this kind of disparity between the two prices, it's hard to imagine a set of taxes and credits large enough to incentivize the switch.


The case for synthetic methane is therefore perhaps less an alternative to fuel, than an alternative to carbon storage. In the future, there will be medium-size emitters such as concrete plants that, by dint of geography, have no reasonable means to transport their captured CO2 save trucking. Under such circumstances, transport costs for 1000 km to a disposal site might reasonably add another $100/ton (see below). Combine that with no need for DAC, a tax on emissions, and perhaps a locally high natural gas cost and synthetic methane might become competitive. But honestly, it's a stretch.


Obviously, investors in synthetic methane are imagining lower prices than this. Perhaps the cost of hydrogen generation will drop faster than expensive, or other supply bottlenecks will arise. But it's hard to make a startup plan work that depends on the miracles of others. As the new, zero-carbon economy evolves there may still be room for synthetic methane. But for now, it's role appears likely to be minimal, at best.

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