economics Archives

Biomethane reducing energy fragility

I spent the last three years of my life almost evangelising about biomethane and more broadly, biofuels. Perhaps that is not the right word given that I am a Christian but basically I was trying to get people more aware about biomethane because of the benefits it could bring to the energy transition. It was something that was overlooked during the course of the hydrogen hype, and there had been very aggressive lobbying and campaigning against biomethane for some political and emotional reasons.

In the backdrop of the wars that are taking place in the Middle East now, the potential impacts on energy systems and markets, I want to revisit the whole biomethane story, sharing the good, and explaining some of the concerns away, while also identifying the concerns that remain, which won’t be dealt with by biomethane.

The Good

Biomethane is produced from anaerobic digestion (AD) of organic matter. It is a natural process though it can be rushed and optimised through temperature and humidity control as well as careful management of the substrate (whatever organic feedstock) put together under those conditions.

Left alone, these organic stuff would have produced carbon dioxide and methane anyways. The carbon dioxide is biogenic so it doesn’t add to global warming potential, but the methane does (and it’s 28 times more potent). So by capturing this methane, we are already reducing emissions of greenhouse gas (GHG).

But what’s even better comes when this captured methane is actually used to displace fossil fuel. And it does so in two ways. Remember I mention it the AD process produces carbon dioxide and methane? The carbon dioxide can be used in industries for making dry ice, for cleaning purposes, and even used as feedstock for some specialty chemicals. Traditionally, these carbon dioxide are from fossil sources, so getting it from biogenic sources reduces final emissions. At the same time, when biomethane is displacing the fossil methane, we further reduce final emissions when we combust it for energy or consume it for other processes.

That is quite a bit of GHG emission reduction isn’t it?

The Better

It doesn’t just stop there. The biogenic carbon dioxide can be used to produce other e-fuels including e-methane that will help increase the methane yield of the feedstock. The other chemical process pathways like gasification, methanation and all will play a role in enabling this. This provides a suitable commercial pathway for green hydrogen to help contribute to energy transition at this stage without having to refit the demand-side equipment. It helps kickstart the market without the transport logistics and infrastructure in place yet.

There’s more. AD produces a liquid slurry that is called digestate as a residue in the reactors. These are remaining organic matter that has been mainly stripped of the carbon content, but other nutrient content remains, making it suitable for use as a fertiliser. Traditionally, fertiliser is made using synthetic ingredients, including ammonium salts, featuring natural gas as a feedstock to the chemical process. By using AD digestate to make up for part of the fertiliser, we are reducing the use of fossil fertiliser and once again reducing final emissions.

As energy security and food security become a more relevant topic, we begin to see how biomethane wonderfully contributes to both the energy and food ecosystems. While we all wonder when the holdup at the Straits of Hormuz is going to end, we can start investing in the right areas that will help create the biomethane ecosystem, which can enhance our energy security and resilience, rather than squandering further resources trying to backstop our fragility.

The feedstock concerns

One of the most common issues around biomethane or biofuels in general is the challenge of having enough feedstocks. At Blunomy, I’ve conducted many feedstock studies and mapped feedstocks. The truth is that we probably won’t be able to meet all the gas demand through the biomethane that we can produce from existing feedstocks. But neither should we.

Just as we should not be relying on a single gas field or a single strait to transport all our gas. Biomethane feedstocks are naturally diversified from various sources, and policies could encourage more organic waste or residue to be properly managed upstream to produce more biomethane.

Moreover, we have not even begun exploring the possibility of growing novel crop feedstocks on marginal land that can be dedicated to energy. These crops serve to rehabilitate the soil, the land ecosystems while contributing to energy. The concern about feedstock limitations should not even feature at this moment when we have not even exploited a tiny fraction of it.

Perpetuating oil & gas interest?

Another political and emotive concern raised is that biomethane will allow the energy industry to maintain oil & gas infrastructure, further entrenching our capture by these companies. We should not perpetuate gas infrastructure and entrench ourselves in the fossil ecosystem.

More often than not, the infrastructure is regulated, and we simply need to have the right policy and governance in place to push them to serve the interests of the energy transition rather than the status quo. In many countries that have started introducing blending mandates for biomethane in the gas networks and pipelines, the largest gas consumers and even fuel suppliers have become the biggest customers for biomethane!

The methane slip concerns

So the feedstock limitation or concern around energy industry interests, isn’t something to fuss over. What we can and ought to fuss over, is the fugitive emissions, and methane leakages from continuing to use of methane for energy in the existing infrastructure. Biomethane is still methane, so while combusting it produces biogenic carbon dioxide, which we consider non-additive GHG, the release of biomethane into the atmosphere itself is still a GHG emission.

This continues to be a challenge and certainly contributes to rising GHG emissions. What we cannot always agree on is whether pushing to end the use of methane entirely is worthwhile.

There is greater consciousness of methane leakages precisely because monitoring has improved, sensing equipment is now more broadly available, and I believe the technology to upkeep the infrastructure has also improved. This is an issue to be resolved through better infrastructure, better management and better systems to ensure accountability, compliance and monitoring.

Biomethane will not resolve the issue of methane leakages, but I am not sure if this problem should be stopping us from exploring biomethane as a solution to all the other above issues that I raised. Natural gas continues to be broadly use, and the huge amount of gas infrastructure already invested into could rightly be used to serve the transition if we are willing to build this biomethane ecosystem.

I hope you’re convinced biomethane is something worth working hard to make manifest in the future we are all working for. It’s worth wondering, when we pay for energy, what are we actually buying? And whether cheap energy comes at the cost of fragility, environmental harm, lower end-use efficiency, and reduced resilience. Are we exhausting our resources, and the environment for what really matters to us?

Update (26 March, 11:18am): Initially the post mentioned methane is 12 times more potent than CO2 in global warming potential but that has been corrected to 28 times.

Structures, systems, brain work

There is fundamentally a tension between bureaucratic structures and human judgment. The reason for such structures is to reduce the need for, and also disperse the responsibility of judgment. Often, it tries to aggregate wisdom but sometimes at the cost of creating more inertia for action.

Bureaucracy starts with good intentions: create systems and structures to minimise errors, repeat proven actions by making them a matter of policy, and prevent potential rogue players from having discretion. And potential rogue players within the system mean just about everyone. Yet it promotes conformity and compliance.

The ones who would break the rules and create wins won’t make the cut for promotion if they go too far with rule-breaking. Often, structures prevent them from going far enough to end up with wins. Those who do would probably cause loopholes to be closed up anyway.

But bureaucracy allows you to swap talents for mediocre hires, especially in highly stable environments. Take the example of infrastructure financing; the early pioneers of project finance did the hard work, used their brains to work out the risks, quantify them and set up best practices. They created financially viable structures matching the underlying needs. The ones who come after just copy their templates, sometimes even without completely understanding how the risk management or control works. They are trained more for pattern recognition and for finding market deals that work for the structures they create. This still brings value to the system, and they are rewarded for this stage of industry development. So, more people who can match the patterns will rise within the system. Those who actually think thoroughly about the risk and keep trying to innovate get stuck in the middle. Even if they stick around long enough, they do not have the chance to get their innovation pushed through the system.

New kinds of infrastructure are overlooked because they are “too hard,” when it’s easier to find what fits in the market or wait for the next deal. And so the previous innovation that succeeds cannibalises on future innovation. And the structure to scale up and deliver greater success on something that works inhibits successes of different variety.

Could it be that Singapore is running up against such an issue?

Carbon capture

I think there is a place for carbon capture and utilisation. But just not the way we have been thinking or approaching it. Carbon capture and storage in some kind of cavern or project and expecting it to hold on to the carbon dioxide does not make sense. But many other carbon sequestration approaches do: applying biochar to ground, injecting carbon dioxide into cement to strengthen the concrete, or any processes that somehow mineralises carbon dioxide into some kind of other compounds including carbonates.

All of the approaches where carbon dioxide is somehow transform into some other form which is more permanent and serves a function make sense. The technologies involve in terms of filtering the carbon dioxide to a certain level of purity, conveying it and handling it, will play important role in the low-carbon economy.

The reason is that carbon dioxide is still an essential part of many industrial production processes. In any case, the main challenge of climate change isn’t really the presence of carbon dioxide – it is the fact that we are taking out fossil carbon and then turning it into carbon dioxide, releasing it into the atmosphere faster than it can be cycled back into other parts of nature. This build-up of carbon dioxide, strengthens the greenhouse effect, making things really nutty for the climate.

But when we are taking biogenic carbon dioxide and using it, there is nothing wrong because the carbon was sequestered from present carbon dioxide in the atmosphere. Using it merely ‘recycles’ the carbon around. Human systems that does carbon capture can play that same recycling role. Take for example the capture of biogas from the anaerobic breakdown of organic matter. That is a mix of methane and carbon dioxide gas; the carbon dioxide gas can be filtered out and then used for industrial processes, while the pure methane (or biomethane as we call it) can be used for energy purposes – combustion to produce heat and drive turbines to produce electricity.

Moreover, the carbon dioxide produced from combustion can be captured, purified, and utilised just like the carbon dioxide filtered out from the biogas. This carbon dioxide can actually be combined with green hydrogen to form many other hydrocarbon molecules that act as our more familiar fuels that are compatible with many of the engines and systems we have. Not just that, the combusted fuel will emit that same ‘biogenic’ carbon dioxide, which would not count as greenhouse emissions because they are in the short-term cycle. Nevertheless, we can still capture that carbon dioxide and then return it to those uses we talked about.

To me, that’s the role of carbon capture in the future – it is really to recycle the carbon just as nature already does it. It is not to erase the carbon dioxide that has already been emitted. It is really naive to think that spending more energy trying to capture the emitted carbon dioxide can be more worthwhile than using alternative forms of energy that do not emit so much carbon dioxide in the process. That would be the role of these technologies in the future.

Skills and degrees

There’s been recurring opinions, stories and new reports about jobs and skills in Singapore over the past couple of months. The Job Skills insights report presented some interesting results that can be interpreted in vastly different ways, and is perhaps worth our society deliberating over.

One of the statistic in the report (page 14) that comes across as strange though not surprising, is that a non-degree holder with high skills proficiency is finding it HARDER (lower chance of getting the job) to get high-skilled jobs while a degree holder with medium to low skills proficiency can access high-skilled jobs more EASILY (higher chance of getting the job).

And on the next page, it claims that those same degree holders who were mid-low in skill proficiency had higher remuneration, and more autonomy in the jobs they got. Overall, the slant of the report seems to be promoting the need to obtain degrees and more qualifications even though it is supposed to highlight the importance of skills.

There are different opinions about what exactly is happening in Singapore. Some believe that if there simply aren’t job opportunities around, the paper chase just ends up being an arms race where jobs are just moving around from one group to another. The winner then becomes the certificate issuing organisations and schools.

Others think that there’s something absurd about hiring process and HR if they are so reliant on the degree or paper qualifications rather than real skills. Perhaps the high density market and having no short of manpower options mean that such patterns emerge where paper ‘evidence’ is used more than trying to screen for real skills. That contributes to some kind of ‘efficiency’ in the process especially when the HR function in Singapore isn’t exactly the most progressive.

There are others who believe the government’s emphasis on skills had just become a matter of incentivising more paper mills because it is easier to have a clear-cut measure of the output of their ‘skills’ policy. This is why instead of having skillsfuture churn out people who have the skills for the future (such as AI-literacy, programming skills, ability to think more strategically, understanding of carbon emissions, understanding of new energy technologies or what sustainability is really about), we simply get more aunties who could bake melon pan, or uncles who could generate good morning messages with GenAI.

I exaggerate.

But the point remains that we have a culture that is steeped in wanting to have tangible proofs of something that is genuinely intangible. And degrees or paper qualification remains a proxy for us to somehow observe skills. The point of it all is really the skills rather than the degree – so to make it about the degree seems rather superficial and short term. If anything, the big companies hiring in Singapore could come to the conclusion that since the degree holders they’re hiring have already hit the mid-low level of skills proficiency, the talent pool is really shallow and this is it, and they forgo hiring the non-degree holders who have high skill proficiencies.

Maybe that is when they start pulling out of the market. Because they are not able to access the real talent pool they need.

In long run, our paper chase actually ends up stopping ourselves.

Policy crowding out

Is job creation the responsibility of the government or businesses/entrepreneurs?

Sure, most governments in capitalistic democracies work hard to reduce red tape, improve ease of doing business and provide all kinds of support to businesses. But can policies to create jobs end up crowding out the private sector activities that create jobs, perhaps even undermining the private sector activities?

For example, when EDB in Singapore attracts MNCs that comes into Singapore and starts hiring, providing good and stable jobs, do they end up disincentivising prospective entrepreneurs from starting their own business? Do they also bid up the cost of strong junior hires for the local companies that need them more? Do the companies that comes into the Singapore market compete out local firms who may have been able to perform the same services in the local economy?

Is there a risk that existing investments in the market hold-hostage our domestic policies? Take, for example, the oil & gas industry in Singapore; do its presence slow down our climate policy? Would the fact that government is busy attracting companies and making things smoother for them cause them to compete more effectively with other local companies who may not have that same support from our own government?

Just bringing up the questions worth pondering over. I’ve no answers but I think it’s worth actually looking into actual data and finding ways to understand some of the answers to these questions I’ve raised.

Understanding carbon intensity versus fuel emissions

One of the reasons I’m writing this article is that Asia Pacific is increasingly recognising the role of renewable and alternative fuels, especially biofuels. And one of the ‘measures’ of sustainability of these fuels, which may be low or zero carbon in emissions, is the carbon intensity (Scope 3). However, it often gets confused with the fuel emissions (Scope 1), and so I thought it was worth explaining clearly.

Fuel decarbonisation is so critical that it covers part of decarbonising electricity generation. Relying on a mix of intermittent renewable generation with short-duration storage in the power system is very challenging. Gas peakers are going to be integral in a system that has a significant share of wind and solar power. Yet there are concerns about carbon emissions associated with gas.

Decarbonising natural gas use and other liquid fuel-use remains a critical lever to achieve net zero by 2050. Renewable fuels, especially biofuels, enable a drop-in solution that bridges our immediate decarbonisation needs with future alternative fuel, or complete electric solutions. There are concerns however, with the sustainability of biofuels, and one of the ‘measures’ of sustainability of these fuels, is the carbon intensity of it.

The carbon intensity of the fuel refers to the lifecycle carbon emitted in the production of the fuel, usually expressed in gCO2e/MJ (reads: grammes of carbon dioxide equivalent per mega-joules). For fuel that is zero emissions, or non-reckonable carbon emissions, there are still carbon emissions associated with its production, processing and transportation before its energy is used. And so if it’s being transported from such a location, or that too much logistics were involved in its feedstock collection, those emissions gets accounted for in this carbon intensity metric. EU use thresholds for carbon intensity to determine if the fuel is ‘sustainable’ or not – on the basis that if the fuel does not achieve a level of emissions reduction, then it cannot be considered renewable.

As should be clear by now, carbon intensity is different from the concept of fuel emissions. The carbon intensity value is not reflective of the emissions of the fuel itself but more of its lifecycle, making it a Scope 3 emission as opposed to Scope 1. Take, for example, a regime where there is a carbon tax associated with fuel emissions, the carbon intensity of the fuel would not actually be considered within the calculation of the carbon tax at all – especially if the tax is designed only to apply to Scope 1 (direct emissions).

However, such a regime where a carbon tax is applied to Scope 1, should be mindful that they do not end up incentivising the use of “low-carbon fuel” that have overly high carbon intensities. Because this would defeat the purpose of trying to price the carbon emission as the direct emissions become displaced by emissions in some other parts of the fuel supply chain.

Carbon intensity is also why the International Maritime Organisation have been pushing for the Net Zero Framework that considers the ‘well-to-wake’ emissions (lifecycle emissions) instead of the ‘tank-to-wake’ (direct Scope 1) emissions. If we are focused only on the ‘tank-to-wake’ emissions, then technically, grey hydrogen or grey ammonia would have zero carbon emissions. We don’t want a case where the emissions are not reduced at the system level but just shifted from one part of the value chain to another – that’s why we care about the carbon intensity of a fuel, not just its direct emissions.

It’s probably worth pointing out I first wrote this article on linkedin and you can find it here.

Energy companies of the future

When I started more than 10 years ago in the infrastructure sector focusing on environmental solutions, I saw a lot of new energy startups. A lot of them were facing difficulty on the capital front because all the wealth of the energy sector is tied up in Oil & Gas or the traditional utilities. The startups needed to access regulated infrastructure, regulated markets as well as capital in order to scale but it was difficult. The incumbents were gate-keeping.

So I came to this conclusion that nurturing startups in the energy space wasn’t so much about forming the next unicorn or tech-giant equivalents. It was about strengthening the incumbents; and that these startups are ultimately finding a match in terms of strategic investors in the incumbents in order to exit or to find their innovations adopted through the value chain.

Even for the commercial & industrial, behind-the-meter type solutions, I had in mind that the traditional incumbents would still win out because of their brands and stability.

Turns out that these became areas where they tend to beat a strategic retreat. Because it was too difficult. The big guys had a couple of things they wanted to sell; and they sure could provide some service in order to sell those electrons or molecules. They would even invest in some hardware on your site such as a metering system, or some tanks and nozzles, etc.

But once things got complex, where they have to manage some operations (even virtual ones), and liability at the customers’ sites, it became too difficult. They also think it’s too small, so they left it to whom they believe would be the small guys.

Now it took a long time but these were still difficult projects for the small guys! The EPC players, system integrators, tech solution providers had to come together, get into the complexities of energy service contracting and setting up new operation protocol to get projects up. Slowly they came up; sometimes with investments from the cashflow of these contracting firms, sometimes from family offices and rich borrowers. Financial innovation sort of quickly caught up to support this.

The resulting model, as it turns out, is more of a fund structure where capital is raised in a vehicle that will deploy capital into those energy-as-a-service projects. There is basically an increasing specialisation in the capital-heavy versus labour/technical-heavy segments of the industry. The market is still struggling to understand whether these C&I type energy assets (be it a new chiller/cooler, some kind of tech-enabled energy management systems, or just a set of solar panels with battery energy storage system) is considered infrastructure. Nevertheless, they see it as riskier than traditional state-granted concession type of infrastructure, but still safer than privatw equity where the money is put into operating companies without committed long-term revenues.

Now, I want to address the segment of the market that is also dealing in utility scale renewable power. The end of market moves and financial innovations seem to also point towards a fund structure. Whether it is Equis Energy (now Vena) or even Brookfield Infrastructure that started off in more traditional infrastructure, a whole lot of large scale renewable projects are eventually funded and operated by funds.

I would have imagined that funds would be taking over the more traditional parts of the sectors but instead, what we are really seeing is that funds have become the vehicle for transiting into a new energy system of the world. Is this just an interim solution or do we expect funds to become the energy companies of the future?

Advancement through dilemmas

As I ponder over the paradoxes of our society and nature, I begin to see more and more how our traditional linear paradigms about advancement and growth jars too much against reality.

There are many things that appears contradictory and yet continue to co-exist peacefully in the world without apparent conflict except in our minds. There are tyrants who are charismatic, loved and admired but also incompetent democratically elected leaders who could set a country back by decades. And there are both decentralised and centralised systems that appear to thrive, and also implode.

We ask ourselves if history proceeds through its course regardless of individual’s actions and it is just collective macro force created by the tiny actions of every individual that matters, or that it progresses through the agency of a few, put in the positions of power and influence? It’s not clear at all.

So when we think that progress in the system involves maturity of technology, of having regulation, standardisation, proper rules of engagement in place, we also recognise that these things stifles innovation and block new, emergent contenders from taking over incumbent structures.

Similarly, having contending standards or technology pathways look as though they are going to create a gridlock that prevents the industry from adopting a single unified approach.

The western, perhaps Anglo-Saxon, thought models make it difficult to hold those juxtaposing, contradictory ideas together because it supposes that there is just this one way that is the right way.

What if that is not reality at all?

Climate startups

Whether it’s climate tech or climate or sustainability startups, I’ve been encountering them recently. Of course, they are just startup companies, looking to find a product-market fit and then scale their business. There is a massive distraction in today’s market where you could grow a business out of making grant applications and putting together plans, where you try to get funding to take off.

This sounds a lot more like research in academia than the economics of a free market. While government is hoping to drive the development of good climate solutions, they are still tapping on the market where it failed, doing so through what they believe are ways to keep things market-driven when they have actually replaced the market and allowed the grant application processes to pick winners.

The challenge is that the winners picked through a grant application process are not going to be the type who wins in the market. These are firms who would have scrutinized the fine print, delivered on arbitrary KPIs and proxies that some bureaucrat came up with in his or her office. And these schemes are just distracting time, money and resources away from the startups towards satisfying governance requirements. After all, ‘it is taxpayers’ money”

The work of growing a new industrial ecosystem isn’t easy and I’ve spent considerable part of my career thinking about ecosystems, value chains, bottlenecks in developing an industry. If the government can give some demand assurance perhaps for a specific project, or product that the customer would be able to use or satisfied with, then it could help. And very often, if politicians want to be able to make claims about having supported one particular development then things becomes more difficult, not easy. When economic support is driven by a desire for narratives rather than allowing the stories to emerge from a system that is created, you can get a poorly specified policy.

Singapore’s 60th

I sat down and listened to the National Day Rally speech with a break in between. In terms of delivery and finding the stories to tell, I’d say Lawrence Wong did well. He also positioned the 4G team well, and to a large extent, it almost feels like political campaigning. The election results this year have shown a good amount of trust in the PAP government and reduced tolerance for weak opposition candidates. So I’d expect that the ruling government would lead confidently and start working on rolling out a vision.

I think the elements of vision involve more of the old playbook, unfortunately: another committee to work on the economy, more new towns and spaces earmarked to be developed, and then programme funding or tweaks to support Singaporeans, in terms of reskilling or upskilling.

There’s this common thread that Lawrence Wong seem to have been emphasizing, but I’m not sure I observe much of it on the ground. He seems to be recognising that general sense that the government had been dominating decision-making, and so there are generally more attempts to involve the people, to gather feedback, or to listen in. If that was his diagnosis about the sentiments, it is correct. It is not something to be ‘fixed’ overnight however. And it will take time to create a culture where people contribute responsibly to policy-making, and to concern themselves with the needs of the wider society.

Over the years in Singapore, there had been more individualistic attitude – because the government’s approach to just about everything involves sticks or carrots, more often than not, there’s this general attitude of ‘what’s in it for me?’ From the NDR speech, I can see Lawrence Wong urging less of that individualistic attitude, more of the ‘we’, but I wonder what are some behaviours that the government or the civil service can lead with, in order to foster and encourage that.