Biomethane is chemically similar to fossil methane, can be transported using existing infrastructure and does not require technical modifications for its use. It can also be produced and consumed sustainably because no new CO₂ emissions into the atmosphere (Emissions during consumption are already part of the natural carbon cycle.
In 2023, the European Union published an amendment to the Renewable Energy Directive (RED II), known as RED III. The stated target is that EU-wide renewable energy consumption should reach 42.5% in 2030. RED III supports the previous REPowerEU target of 35 billion cubic meters of annual sustainable biomethane production by 2030.
Depending on European and national legislation, each European country has its own means to support the biomethane market.
GERMANY
Germany has a long tradition in the production and use of biomethane. Biomethane production started in 2006, when the first biogas modernization plant was commissioned in Pliening, Bavaria, near Munich. Since then, the number of biomethane plants and the total annual production capacity have steadily increased. Today, Germany is European leader in biomethane production.
Revised Energy Law for Buildings (GEG) from 2023 opens new opportunities for biomethane use on the German heating market. From 2024, new heating systems must use at least 65% of renewable energy, rising to 100% by 2045. The act encourages the use of biomethane with heat pumps in local and district heating networks, boosting demand.
Demand growth will be accentuated in scenarios where hydrogen infrastructure is limited or delayedwith biomethane becoming the main option for meeting renewable energy requirements.
Biomethane production in Germany benefits from preferential access compared to domestic gas production and imports to support the energy transition. This applies to both the connection of biomethane installations to the gas grid and the injection of biomethane into the grid.
The use of biomethane in the transport sector is permitted under the Federal Pollution Control Act (Bundes-Immissionsschutzgesetz - BImSchG), which requires oil companies to reduce their carbon footprint. It allows the physical use of biomethane produced from a specific list of feedstocks. Alternatively, greenhouse gas (GHG) certificates generated from biomethane can be used. Each excess tonne of CO₂ attracts a penalty of €470.
The central factors influencing the biogas and biomethane market can be summarized as follows, according to an analysis agriportance:
- GHG (greenhouse gas) quota: Ensures that firms favor advanced biofuels, leading to higher biomethane prices in Germany.
- Different substrate categories: Biomethane can be supported differently depending on the feedstock used. Biomethane from manure and advanced residues offers the best revenue opportunities, as GHG value is a key driver in pricing.
- Long-term marketing opportunities: Through 7-year supply contracts, biogas producers can secure stable sources of income.
- Spot market: Spot market analysis shows that biomethane is traded at the current exchange price, offering additional revenue opportunities.
FRANCE
The European Commission has approved a French proposal to offer €1.5 billion for biomethane production projects. These funds are for installations with an annual capacity of more than 25 GWh per year. Beneficiaries will be selected through a call for tender.
Support shall take the form of 15-year difference contracts. "The amount of aid corresponds to the difference between the reference price fixed in the beneficiary's tender offer and the market price of natural gas," the Commission said. "However, if the market price of natural gas is higher than the reference price, the difference between the two prices will be returned to the state."
A contract for difference guarantees revenue for operators while protecting the public from high prices. In this way, "producers do not make extra profits from excessively high market prices, while at the same time always having the revenue guaranteed by the government," explains the Commission, quoted by www.rigzone.com.
France has set a target to increase the share of renewable gas in national natural gas consumption to 10% by 2030 and to increase biogas production to 24-32 TWh per year by 2028. The French biomethane industry supports a target of 20% renewable gas in France's gas consumption by 2030.
France also has fixed feed-in tariffs, guaranteed for 15 years, which varies depending on the size and type of installation. A premium tariff for the use of a particular type of raw material.
Guarantee of origin mechanism allows the physical consumption of the biomethane molecule to be decoupled from its contractual sale to a consumer, so that consumers located anywhere in the territory (communities, individuals, industries, etc.) can purchase renewable gas through their supply contract, as the biomethane injected into a network is mixed with the gas flow in the pipelines.
ITALY
"Italy is among the top three countries in Europe in terms of planned investments in biomethane by 2030, according to EBA," said Claudio Sanna, President Elevion Group Italy, a company producing biomethane.
Italy has 2,260 biogas production plants in 2024, with an installed capacity of 1,455 MW and a production of about 2.5 billion cubic meters. Italy ranks 4th in the world in biomethane production, after Germany, China and the US.
Guarantee of Origin (GO) Mechanism of the country will play a key role in achieving this goal. They are one of the main incentive schemes facilitating investment in renewable energy installations. "GO will bring value to the market for end-users and hard-to-electrify sectors if we can replace gas with biomethane."
Biomethane is also promoted through the allocation of Fuel Consumption Emission Certificates ("Certificati di Immissione in Consumo di biocarburanti", better known as "CICs") to companies producing non-renewable fuels. As a general rule, 1 CIC is attributed for every 10 GCal of biomethane produced and released for consumption to producers; 1 CIC is attributed for every 5 GCal if the biomethane comes from biogas produced under specific conditions (specified in Annex 3 to the Ministerial Decree of October 10, 2014).
On September 15, 2022, the Ministry for Ecological Transition has issued a decree aimed at supporting biomethane production in the period 2022-2026. It provides for incentives to build new plants for the production of biomethane from organic or agricultural waste or for installations producing electricity from agricultural biogas undergoing conversion. It also provides for a capital contribution of 40% of the eligible investment expenditure and a incentive tariff for net biomethane production for a period of 15 years.
