Biomethane, a refined form of biogas, has many advantages. It is identical in chemical composition to fossil natural gas, needs no additional transport infrastructure, and can be burned in the same thermal units. It can also be produced sustainably, adding no CO2 into the atmosphere.
The EU currently produces enough biomethane to satisfy around 2% of its total natural gas consumption. According to the REPowerEU plan, the block aims to increase that share to 20% by 2030, which would require raising production to over 350 TWh annually. The market needs to develop faster.
Biomethane production in Europe
“Three main factors determine biomethane production,” says Hugo Malfit, originator at Ecohz. “It depends on the availability of feedstocks, regulation and legislative support, and the share of biogas upgraded to biomethane.” (To watch a 30-minute webinar on the topic, click here.)
Biogas production in Europe remained stable between 2016 and 2022. However, the volume of refined biomethane in the market increased, reaching 44 TWh in 2021.
Combined biomethane and biogas production in Europe (TWh). Source: EBA
Capacity expansion is underway. There are currently almost 20,000 biogas plants and almost 1,400 biomethane plants in Europe. Denmark, one of the continent’s top-5 producers, already satisfies 40% of its domestic gas demand with biomethane and aims to reach 100% by 2030. Other top producers are Germany, France, the UK, the Netherlands, and Italy.
As natural gas prices soften, some uncertainty has remained in the biomethane space, compelling buyers to enter long-term agreements. However, demand has remained strong and more certified volumes are entering the market. “There is a lot of growth in the pipeline. The market needs more supportive policy to get it off the ground,” Hugo adds.
Towards a harmonised European biomethane market
Like electricity, biomethane Guarantees of Origin certify the renewable quality of 1 MWh of gas. However, unlike the power system, there is not yet a harmonised European biomethane market that allows for the free transfer of physical volumes and the corresponding Guarantees of Origin (GOs).
Most countries have their own registries where GOs are issued. But not all of them are connected to a centralised hub. Yet, the Association of Issuing Bodies, which oversees the system for electricity GOs, expects to have ten countries registered by the end of 2024.
The latest Renewable Energy Directive (RED III) also pushes for greater unification and growth. It sets higher national targets for biofuels and clarifies the life cycle of GOs. It removes barriers to long-term offtake agreements, too. Importantly, RED III creates a Union Database, a single European mass balance system that will contain all the information about fuels, their environmental attributes, and transactions.
More countries are gradually joining harmonised systems. France, Europe’s second largest producer, expects to open for biomethane exports and imports in 2024, bringing a significant volume into the market.
Why, where and how to use biomethane certificates
Companies can use biomethane certificates for voluntary and compliance purposes. Reporting to sustainability frameworks, such as CDP, and stakeholders is voluntary. Aligning with the Corporate Sustainability Reporting Directive (CSRD) or buying EU ETS quotas falls under the mandatory umbrella.
“Why you want to use biomethane impacts how you can source it,” Net Zero Advisor Nils Holta explains. For instance, to demonstrate voluntary action, it may be sufficient for organisations to buy unbundled certificates – GOs that match physical gas volumes obtained from other sources.
On the other hand, the EU ETS has stricter requirements. It demands gas GOs bundled with physical volumes and proof of sustainability issued by the ISCC. The CSRD relies on the same methodology, meaning companies under its scope must fulfil the EU ETS requirements. Higher requirements, however, also make bundled GOs more expensive.
Transferring GOs across borders may be an option to cut costs. “Provided there is a connection to the EU gas network, it is sometimes possible to buy GOs in a country where they are cheaper and cancel them for consumption in another country even if their registries are not connected,” Hugo Malfit explains. “However, these ex-domain cancellations are a temporary solution. As more countries connect to a single hub, more options will become available for consumers.”
How can Ecohz help?
Our team of experts helps companies source biomethane certificates that cover their needs in the most cost-effectively manner.
Ecohz can procure bundled and unbundled biomethane certificates in Europe, providing companies with flexibility and access.
Our advisors also assist in setting up Gas Purchase Agreements (GPAs). Although these contracts are not available in every country, GPAs ensure the availability of biomethane over an extended period in a market with limited supply.
Moreover, Ecohz provides personalised advisory services such as market analysis, assessment of needs on a case-by-case basis, and ongoing support. “We create customised plans that deliver your climate targets,” Nils Holta concludes. “We are here to help you use biomethane as part of that strategy.”