Europe’s biggest biogas producer warns EU targets unachievable

Europe’s largest biogas producer has warned that it will take years to significantly boost production despite the EU pushing for a rapid increase in output to reduce reliance on Russian gas.

Biomethane is chemically identical to natural gas but produced through the controlled decomposition of animal and industrial waste. The EU wants output to more than double and contribute to about 3 per cent of a targeted two-thirds reduction in imports of Russian gas by the end of the year.

However, Ole Hvelplund, chief executive of Danish biomethane producer Nature Energy, said the target was unrealistic because it takes at least two years to secure permits and construct plants.

“The main factor of getting more production in place is to build more plants. You don’t do that over the summer. It takes some time,” he told the Financial Times. “It will not be doubling on existing plants because you have a lot of physical restraints. In the short run to the next winter, it will be limited what we can do.”

With Moscow cutting supplies to Europe, every cubic metre of the EU plan to replace 101.5bn cubic metres of Russian gas this year will matter if the bloc is to avoid blackouts and shutdowns of heavy industry over winter when demand rises.

A European Commission official said the aims for reducing reliance on Russian gas by the end of the year, including the 3.5 bcm increase in biomethane production, were not binding “but rather estimates of what we believe is possible to achieve”.

Biogas is produced primarily using waste from crops, animal manure and industrial activity through “anaerobic digestion”, a process by which bacteria break down organic matter in an oxygen-free environment. This is then purified into biomethane by extracting carbon dioxide, and can then be treated identically to natural gas in the pipeline network.

Proponents say the CO₂ emissions generated during the purification would have been emitted naturally anyway, so the technology saves emissions that would have been released by burning natural gas.

However, the nascent technology has come under fire over its environmental credentials. A recent Imperial College report, for example, found a higher level of leaks of methane — a far more potent greenhouse gas than CO₂ — than previously thought.

The biomethane industry is attempting to transform from a fragmented, cottage industry into industrial-scale operations. Nature, which generated €200mn of revenues last year, is leading the charge but the sector is increasingly drawing the attention of energy majors.

Shell, which signed a long-term deal to buy Nature’s biomethane supply in 2020, started its first US biomethane facility last September, while TotalEnergies has partnered with Veolia to produce biomethane from waste water. France’s Engie and container shipping giant CMA CGM agreed last week to co-invest in a biomethane plant.

An International Energy Agency report in March 2020 said the average price of biomethane production was $19 per million British thermal units plus additional grid injection costs, versus the current price of gas in Europe at roughly $50/Mbtu.

However, it is less clear whether those economics are incentivising production as industry investment is hard to grasp because of the fragmentation, and small operators can struggle to access financing.

Hvelplund said that the industry’s future was bright after the EU doubled its biomethane production target to 35 bcm by 2030. But he warned that supportive policy measures including a floor on gas prices would be needed to incentivise new projects.

“We have to find places to build these plants, a quick way to do permitting, easy access to the gas grid, easy access to biowaste in a circle of 25km and a floor price on gas if we get back to gas prices in the past — then it will open up a lot of investment in Europe,” he said.

Most Related Links :
usnewsmail Governmental News Finance News

Source link

Back to top button