Without binding European Union targets, it will be left up to individual member states to create the policy conditions to develop the biomethane sector.

The European Commission unveiled an ambitious target in 2022 to increase biomethane production. It wants to scale up output roughly ten times by the end of the decade, as part of its broader push to wean Europe off Russian gas and quicken the pace of the energy transition.

But even advocates for the low-carbon fuel acknowledge that reaching this goal will be a tall order, pointing to a lack of policy support at the EU level.

Benefits

Biomethane has clear appeal for a continent so reliant on energy imports, given it is a homegrown source of heat and power. It can make agricultural and waste management more sustainable, capturing methane that would otherwise escape into the atmosphere, and can replace more polluting energy sources. It has the potential to be carbon neutral, or even carbon negative in the right conditions.

Biomethane can replace natural gas, using the same infrastructure and appliances to serve most economic sectors, from heating and power to industry and transport. There are also times, such as 2022, when the resource sells at a discount to natural gas.

A further appeal is that biomethane can provide an additional source of revenue for small-scale farms. Anaerobic digestion creates digestate as a by-product, which can be used as an alternative to potash and phosphate-based fertiliser.

Plants to produce it also rely on relatively inexpensive technologies, using materials readily available in Europe.

Progress so far

The EU produced 3.4 bcm of biomethane in 2022, while Europe as a whole produced 4.2 bcm. In its REPowerEU plan, the European Commission targeted 35 bcm per year of biomethane output by 2030.

Achieving this will be no small feat, although the project pipeline is rapidly expanding. EU output rose 21% in 2022, thanks largely to growth in France, Italy and Denmark. The group also produced a further 15 bcm of biogas, which can be upgraded into biomethane, as long as the plants can be hooked up to the pipeline system.

And cash is flowing into the sector. In June 2023, the European Biogas Association (EBA) estimated developers had plans for 18 billion euros (£15.5bn) in new biomethane projects that were due online by 2030. France and Italy alone accounted for a combined 2.5bn euros (£2.1bn), the EBA said, citing favourable policy and market conditions in those countries.

Despite this, the EU is not on track for the 2030 goal. The EBA estimated that reaching the target would require 83bn euros (£71.3bn) in investment, with annual output growth needing to climb to 33.8% on average.

Policy problems

A report by Guidehouse published in April estimated the EU could produce 40 bcm of biomethane in 2030, rising to 101 bcm in 2040 and 150 bcm in 2050.

Adding Norway, Switzerland and the UK into the mix, these figures rise to 44 bcm, 110 bcm and 165 bcm respectively.

The problem is policy, James Watson, secretary general of Eurogas, said to E-FWD. “The only way to get the 35 bcm is having the right policy framework,” he explained, describing the EU’s Hydrogen and Gas Decarbonisation Package, recently agreed by the European Council and Parliament, as “a missed opportunity” to put this framework in place.

The European Commission had wanted to make the 35 bcm goal legally binding. While the European Parliament backed the move, member states resisted it. As such, Brussels can encourage member states to give biomethane a greater role in their national energy and climate plans, but little more.

Numbers matter

“It is one of the few REPowerEU targets that is technically achievable, but it will cost a fortune to taxpayers,” Thierry Bros, energy expert at Sciences Po Paris, told E-FWD. “The high cost is why member states blocked including legal obligations in the hydrogen and gas markets decarbonisation package.”

For example in France, feed-in tariffs (FiTs) for biomethane range from 73-178 euros (£63-153) per MWh. “It’s clearly not very competitive with natural gas prices now at 30 euros [£25.7] per MWh,” he said.

Biomethane production costs range from 55-110 euros (£47-94) per MWh, the EBA said last year. Even today, biomethane is as competitive as solar plus necessary batteries, according to Watson. Costs should fall further through economies of scale, as the sector expands.

But, he says, public money is needed to drive this expansion, whether in the form of FiTs, grants, auctions or other mechanisms.

Country-level action

Some countries have set mandatory targets for biomethane such as Netherlands, which has passed a law stating the fuel should replace 20% of gas in heating by 2030. Likewise, France has mandated it should account for 10% of the overall gas mix by the same year. These approaches can work better than simple production targets, Watson noted.

“Member states can decide what mechanism is best for them, but our strong argument is to set a target or a mandate. The French and Dutch systems are both highly acceptable to us,” he said.

Permitting can be difficult in rural areas because of concerns about bad odours and increased traffic. In urban areas, where biomethane plants can be installed at existing sewage and wastewater facilities, this is less of an issue.

Incentivising farmers to bring their waste to central collection points is one such solution and an option that France has encouraged, with the use of its FiTs. France has also used auctions to provide support for larger biomethane projects.

Engie is one company investing in the sector. It aims to put 2bn euros (£1.7bn) into the sector by 2030, with the aim of producing 5 TWh of biomethane. The company has also talked of its new Gaya project, in France, which uses solid waste to produce biomethane via pyrogasification.

Cross-border trade

There is also scope to improve international trade in biomethane. “Some of our members have said it is very hard to do cross-border trade of biomethane, and in some jurisdictions it is even prohibited,” Watson said.

“You should be able to buy a biomethane molecule in Portugal and have a system where you can claim that molecule as a buyer in Finland – the sustainable certificates should be tradable across all jurisdictions. That would also be a mechanism to drive investment into the sector.”

The EU’s Union Database, established in January, aimed to encourage this cross-border trade. It improved the traceability of sustainable biofuels, avoiding double counting and addressing concerns about fraud.

However, it does not yet allow traders to register sustainable biomethane from outside the EU gas grid. As such, the EU cannot accept the fuel produced in neighbouring countries. The UK is a leading producer shut out, as a result, while Ukraine also gets the shoulder, despite its potential.

Commissioner Kadri Simson, speaking in April, highlighted biomethane from Ukraine as driving progress on both decarbonisation and energy security. The EU signed a memorandum of understanding with Ukraine on the topic in February 2023.

The two sides are keen to “work together to get biomethane flowing across borders”, the official said.

There are disputes over whether biomethane is suitable, largely based on its feedstock. Essentially, when produced from waste this would qualify. Watson noted this would include cover crops, which farmers grow to restore nutrients in the soil and not used for animal or human feed.

Eurogas opposes the use of energy crops such as corn or wood. Germany and several other countries are now looking to clamp down on biomethane production from energy crops.

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