Reforestation is a threat to permanent grasslands in many alpine regions. Using these areas to produce biogas energy may help to preserve these important landscapes and save fossil fuels by adding a renewable local heat and electricity source. This case study compares (a) a status quo (SQ) reference scenario with heating oil, wood-chips, and grid electricity as municipal energy sources, and (b) a hypothetical local biogas (LB) scenario (to also be used as a municipal energy source) based on a 500-kW_el biogas plant with steam explosion pretreatment. Here, hay from previously unused grassland is the main biogas substrate, whereas, in the reference SQ scenario, these grasslands remain unused. Life cycle assessment (LCA) results for LB and SQ scenarios are significantly different at p < 0.05 in all six impact categories. In three categories, the LB scenario has lower impacts than the SQ scenario, including climate change (0.367 CO₂-eq kWhel-1 versus 0.501 CO₂-eq kWhel-1). Dominant contributions to climate change in the SQ scenario are from the extant municipal energy sources that the LB biogas plant would replace; in the LB scenario, important contributions include unburned methane from the biogas plant, as well as CO₂ emissions from hay production machines. In summary, important environmental impacts can be reduced and alpine grasslands can be preserved by biogas production from that grass. The advantages of integrating a local biogas plant in municipal energy and waste systems depend strongly on the extant municipal energy system characteristics.