CO2-compensated natural gas economically beats synthetic methane

Abstract

CO₂-neutral carbon-based gases, such as synthetic methane, offer high volumetric energy density and serve as viable greenhouse gas (GHG) mitigation measures for various end uses, including industrial processes and heating. Synthetic methane can utilize existing natural gas infrastructure, minimizing the need for demand-side transformation. Synthetic methane production requires sustainable carbon sources, such as direct air carbon capture (DACC) and electricity-based hydrogen from energy-intensive electrolysis (renewable hydrogen path). Alternatively, sustainable carbon can be used to compensate for CO₂ emissions from fossil natural gas (natural gas path). In this study, we design a comparative framework to show that the economic competition between synthetic methane and CO₂-compensated fossil natural gas is independent of CO₂ supply costs. We revise and consolidate literature supply costs of synthetic methane from potential exporting countries and compare them to costs of CO₂-compensated fossil natural gas. In addition, we compare the supply chain emissions of both pathways. The results indicate that synthetic methane is only cost-competitive when fossil natural gas prices exceed 74 EUR/MWh in 2030 and 52 EUR/MWh in 2050 in the Tech_progressive scenario with progressive technology cost assumptions. The study highlights that a cost-based regulatory approach may favor the natural gas path over the renewable hydrogen path due to the higher cost of synthetic methane. Applying a CO₂ penalty for compensation for supply chain emissions can improve the competitiveness of synthetic methane only for high methane leakage rates and CO₂ costs. This research contributes to the debate on cost-effective methane supply and the role of synthetic methane in promoting energy efficiency and sustainable energy supply. In addition, the developed comparative framework is generally transferable to other carbon-based energy carriers.