According to the American Biogas Council, U.S. developers added over 120 projects in 2024, setting a record year, yet fewer than 2,500 systems nationwide capture only ~15% of the known potential. This untapped potential lies in unmanaged organic waste; because methane is far more potent than CO2, capturing it yields immediate climate benefits alongside low-carbon fuels. This article is based on U.S. dynamics and insights, but the same mechanisms apply to international audiences navigating similar feedstock challenges.
While early projects centered on producing renewable natural gas (RNG), the market is expanding into alternative fuels like biodiesel and sustainable aviation fuel (SAF). These new outlets are raising demand for consistent, high-quality feedstocks and pressure to secure reliable supply at scale. Updates to the federal Section 45Z tax credit, now extended through 2029 and taking effect in 2026, reinforce this shift by limiting eligibility to fuels produced using feedstocks sourced from the United States, Canada, or Mexico.
As a result, feedstock sourcing now defines project success. Developers must manage supply variability, balance proximity with scale, and navigate regulations that can enable or complicate project delivery. This article explores actionable strategic tensions and offers practical solutions for a rapidly evolving market.
Key Takeaways
- Diversifying feedstock sources reduces exposure to supply volatility.
- Projects must balance local sourcing with the scale needed for favorable economics.
- Early coordination with regulators and local stakeholders streamlines permitting and incentives.
- Flexible sourcing lets developers adapt to shifting markets, policies, and operating conditions.
Feedstock sources: a shifting landscape
Historically, biogas projects relied on single-source feedstocks such as manure or sludge. These predictable waste streams simplified logistical planning and permitting, making project implementation straightforward.
Today, the demand has broadened. Competition for traditional feedstock sources, coupled with the expansion of biogas into new applications, has driven many developers toward multi-feedstock strategies, or co-digestion. This approach combines diverse waste streams, such as food waste, agricultural residues, fats, oils, greases, and yard waste, to achieve higher yields and consistent production. Developers now optimize “digester recipes” to fine-tune output and process stability.
The shift toward co-digestion has introduced additional planning and operational complexity. Each feedstock presents operational challenges: food waste risks contamination, fats need special handling, and agricultural residues may require preprocessing. Manure and sludge, while more predictable, require blending with higher-energy materials to sustain output. As portfolios expand, compatibility, storage, and process stability become critical considerations.
Managing multiple feedstocks effectively requires more nuanced strategies. Developers need to carefully select complementary feedstocks that balance one another’s characteristics.
Strategic tensions in feedstock sourcing
In practice, developers consistently encounter several key strategic tensions. Understanding and addressing these challenges is crucial to achieving project success.
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Feedstock Availability vs Predictability of Supply
How do we manage the tradeoff between high-quality, inconsistent streams and lower-quality, reliable sources?
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Local Sourcing vs Economies of Scale
How do we minimize transport and handling costs without sacrificing the scale needed for strong project economics?
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Policy Support vs Regulatory Complexity
How do we capture policy-driven opportunity while managing regulatory requirments?
Availability vs. Predictability of Supply
Balancing abundant but unpredictable feedstocks with stable yet lower-quality sources is a major challenge. High-yield inputs like food waste can vary significantly in volume and quality, while consistent sources such as sludge or manure offer reliable supply but often can’t support high-output, large-scale projects.
Developers frequently struggle finding an optimal balance. Projects that rely too heavily on unpredictable streams may experience frequent operational disruptions, whereas those dependent solely on predictable but low-quality streams may struggle economically.
Blending feedstocks mitigates volatility and successful developers accomplish this by diversifying their portfolios. Combining multiple feedstocks reduces vulnerability to supply disruptions and helps maintain stable production. Detailed geographic mapping and waste stream analyses can help identify clusters of reliable supply, reducing overall sourcing uncertainty.
Local Sourcing vs. Economies of Scale
Feedstocks can degrade quickly, making local sourcing desirable to minimize transportation costs and logistical complexity. However, sourcing exclusively from nearby areas often limits the operational scale required for economic viability.
Conversely, expanding sourcing distances to achieve greater scale introduces higher transport costs and logistical complications, such as managing multiple collection routes, preserving feedstock quality during transit, and increased regulatory scrutiny.
To manage this, developers often co-locate biogas facilities near anchor feedstock producers like major farms, wastewater treatment plants, or food processors. This approach can simplify logistics and lower transportation costs, but adds complexity around site permitting, community engagement, and infrastructure sharing.
Policy Support vs. Regulatory Complexity
Supportive policies, including renewable portfolio standards, clean fuel standards, landfill diversion mandates, and various financial incentives, significantly enhance biogas project viability. Yet, these same policies can increase regulatory complexity, imposing lengthy permitting processes, stringent environmental standards, or additional compliance requirements.
Developers frequently underestimate how regulatory factors tied to supportive policies can delay or complicate project timelines. Issues often arise with co-digestion projects that involve multiple feedstocks or novel processing methods, triggering more rigorous environmental reviews, public consultation processes, or complex air-quality permitting requirements.
Proactive engagement with regulatory agencies and early integration of compliance strategies into project planning helps developers mitigate these risks. Anticipating and addressing regulatory challenges early in the project lifecycle can reduce costly delays and unexpected financial burdens.
For example, recent revisions to the Section 45Z Clean Fuel Production Credit under the One Big Beautiful Bill Act highlight the need for early alignment with policy requirements. Beginning in 2026, only fuels made from feedstocks sourced in the United States, Canada, or Mexico will be eligible for the credit, which remains in place through 2029. These changes reinforce the long-term value of domestic feedstock strategies while narrowing options for projects reliant on imported materials.
Practical market insights
Beyond strategic tensions, developers often pursue multiple revenue streams to strengthen project economics. Biogas projects commonly generate income from tipping fees (fees paid by waste providers for accepting organic materials), direct sales of renewable fuels, and the sale of digestate byproducts used as fertilizer or soil amendments.
Capturing these revenues requires familiarity with local markets and thoughtful alignment of sourcing strategies with incentives and regulations. Successful projects typically establish strong local partnerships, secure long-term feedstock contracts, and build flexibility into operational strategies, which enhance financial stability and allow projects to better adapt to market fluctuations and policy changes.
Investing effort in stakeholder relationships, engaging local communities early, and aligning closely with local waste management policies provides a competitive edge. These actions can improve community acceptance, reduce operational risks, and enhance overall project resilience.
Effective feedstock sourcing is crucial
As the biogas industry evolves, effective feedstock sourcing strategies have become a foundational determinant of success. The ability to navigate inherent tensions, such as availability versus predictability, local sourcing versus operational scale, and policy support versus regulatory complexity, is now crucial for the commercial viability and resilience of biogas projects.
Developers that understand these strategic challenges, actively anticipate market dynamics, and adapt their sourcing strategies accordingly are positioned to manage risks and thrive amid uncertainty. Success in this evolving market increasingly depends on the capacity to remain flexible, proactively engage stakeholders, and consistently align sourcing strategies with local conditions and regulatory frameworks.
Feedstock sourcing is now a strategic capability that can differentiate successful projects from struggling ones. By recognizing and thoughtfully addressing these complexities, developers can build robust, economically sustainable operations ready to meet the demands of a rapidly transitioning energy landscape.
Want to know more?
Mike Pryor
Senior Consultant