INTERVIEW: Renewable gas 'tradability' pivotal as substantial EU targets loom: EBA

Europe's renewable gas sector will require cross-border "tradability" if it hopes to achieve sizeable EU biomethane production targets for 2030, as the industry eyes an almost tenfold increase on current production levels, according to Harmen Dekker, CEO of the European Biogas Association.

Despite rapid expansion in the renewable gas sector in recent years, and biomethane's incorporation in the EU's REPowerEU initiative, growth prospects for biogas -- and biomethane in particular -- face an array of challenges that will require a coordinated approach, Dekker told S&P Global Commodity Insights in an interview.

"In general what I think is needed, away from the targets, is coherence," Dekker said, "The industry needs tradability. We need to ensure that we can cross-trade across borders, for all European countries, against the same standards."

Strategically, the role of biogas and specifically biomethane in the EU's REPowerEU scheme -- which aims to ensure energy security, cleaner energy sources and the ongoing diversification of supplies -- is significant.

Biogas is made through anaerobic digestion of organic material to produce a feedstock that can then be further broken down by micro-organisms to produce biogas -- which can be used to fire combine heat and power (CHP) engines or upgraded into biomethane able to replace fossil methane in gas grids -- and digestate, which can be used for fertilizer.

The EU aims for biomethane production to reach 35 Bcm by 2030, which Dekker described as a "high target" but still achievable.

"It's a challenge, but not undoable," Dekker said. "If no ambitious targets are set, one can get complacent."

Europe's biomethane production last year was less than 4 Bcm in total, with Germany providing more than 1 Bcm of that, according to data from S&P Global.

Europe had some 20,000 biogas plants, including more than 1,000 biomethane plants, as of the end of 2021, according to the EBA's most recent data. Total biogas production represents an energy equivalent of around 18 Bcm, Dekker said, the bulk of which is currently used in heating and electricity generation.

Growth has been notably rapid in Germany, which has built around 6,000 plants in the space of nine years, demonstrating what can be achieved. The EBA estimates that Europe will need an additional 5,000 biogas plants by 2030, albeit those plants will need to be larger than many of the existing facilities.

Plans to upscale the sector's production base will involve unlocking sustainable feedstocks, which include food and animal waste, retrofitting existing gas infrastructure, fast-tracking permitting, integrating off-grid production, valorization of co-products and driving down costs for producers, all of which require a comprehensive and integrated approach.

Policy frameworks

Scaling up renewable gases in Europe has its own particular challenges, however, as the sector looks to standardize a unified and integrated policy framework for biogas and biomethane.

"Biogas is multi-faceted, and sometimes I'm jealous of other green technologies which merely are active in only one domain," Dekker said.

"We are positively involved in climate law, energy law, agricultural law, waste management law, you name it. So many items influence the sector, and more and more we see that specific regulations are bringing drivers, but it's also bringing administrative burdens," he added.

Dekker said that permitting for renewable gases needs to happen faster, and that "the acknowledgement of biomethane must occur in every end-use sector."

"Biomethane often gets wrapped into the topic of declining fossil gas use, but our target by 2050 is for biogas to represent at least 40-60% of the total gas consumption, with hydrogen taking up the rest," he added.

Relative to total gas consumption today, EU member states also vary widely in output. Denmark, for example, has already offset more than 30% of its fossil gas consumption with biomethane production, and aims to achieve 100% by around 2030.

In the Netherlands, by contrast, biomethane and biogas combined account for just 1% of gas consumption, according to the EBA.

"In terms of policy, the European Commission is one thing, but the targets set at European level will be achieved with the individual contribution of the different member states. We need to make sure that all member states are setting targets, which together can amount to the 35 Bcm," Dekker said.

Pluralism in EU policy towards biomethane and biogas has also had a knock-on effect when it comes to production costs, Dekker added.

France, for example, shows greater support for smaller farmers producing biomethane from smaller plants. Denmark, contrastingly, favors more industrial scale production.

The EBA sees current biomethane production costs ranging from Eur55/MWh to Eur110/MWh, depending on the feedstock, location and plant scale, it said.

The cost of producing biomethane in 2022 averaged around Eur80/MWh ($86/MWh), well below the average TTF month-ahead price of Eur132.30/MWh last year, according to price assessments by Platts, part of S&P Global Commodity Insights.

Infrastructure developments

Scalability also requires investment, an area where the EBA sees much progress already. Earlier this year, Goldman Sachs Asset Management estimated that around $70-$80 billion of investment would be needed to achieve the EU's target of 35 Bcm by 2030.

Much of that will need to take place through infrastructure developments, according to the EBA, in addition to technological advancements in the sector.

"The second thing is add-ons, to make sure you can use the same infrastructure you have for extra components," Dekker said. "For example, using biogenic CO2 combined with peak-shaving of electricity, you create green synthetic methane, which is currently of interest to the policy makers as it will allow to store the excess energy in a safe and green way."

Biomethane can make use of the existing gas infrastructure, according to Dekker, and although some modifications can be necessary to adapt for it, this is far less costly than adoption for other renewable energies.

"Fossil gas travels through centralized grids, moving into distribution, where we have our largest potential for biomethane to flow back into the grid. But this can only happen if there's a reverse flow installed. Gas operators are already implementing this, and we are working together with the EC institutions to ensure that this is being supported and accelerated," Dekker said.

Earlier this month, the EBA co-launched Biomethaverse, an EU-funded biomethane project that aims to scale-up the industry and reduce production costs while also optimizing both carbon-emitting demonstrators such as anaerobic digestion and gasification, as well as renewable hydrogen and electricity.

Some 22 partners from nine European countries have agreed to participate in the project over the next five years, the association said, with the project aiming to establish five biomethane production pathways in France, Greece, Italy, Sweden and Ukraine.

"Hydrogen has done a tremendously good job at looking promising and being seen. It's on us to show that we are already the cheapest and most scalable renewable gas today and that we can scale up today," Dekker concluded.