Russia’s large-scale invasion of Ukraine has adjusted the EU’s energy plans. Thus, in March, the European Commission published the REPowerEU plan, which refers to the gradual phase-out of russian energy resources. Renewable gases, particularly biomethane, will play a key role in achieving Europe’s goals. According to 2020 statistics, the EU produces three bcm of biomethane and 17 bcm of biogas per year. The REPowerEU plan aims to produce 35 bcm of biomethane annually by 2030. And Ukraine can become an essential element of this process because we have a significant potential to import biomethane to Europe. Market experts told us about the prospects for producing this fuel in Ukraine and its export to the EU in the GTSOU column «Expert Opinions».
Valerii Bezus, Head of the State Agency on Energy Efficiency of Ukraine, is convinced that the development of biomethane production and the use of biomethane cannot be delayed and shall be carried out, first of all under national interests in the field of energy security. Therefore, the Agency is working to intensify the development of this industry.
«At the state level, we consolidated efforts to create a legal framework for developing the biomethane market. The Parliament adopted the relevant law, the Government approved the Procedure for functioning of the biomethane register, developed by the State Agency for Energy Efficiency and the Ministry of Energy, and the NEURC amended GTS and GDS Codes to allow the supply of biomethane into the grid. Currently, the State Agency for Energy Efficiency is actively working to establish a register of biomethane guarantees of origin, inter alia, with European partners», – said. V. Bezus.
As for the competitiveness of biomethane, it is evident: that given the current gas prices, biomethane projects are economically attractive, and the Head of the State Agency for Energy Efficiency is sure.
«Serious talk about entering the European biomethane market will be possible once considerable capacities for its production and real commercial volumes are available, making it possible to assume the corresponding obligations under export contracts. On the part of the state, it is important to create appropriate legal and regulatory conditions for such exports ahead of time when they become physically possible. We expect that Ukraine will manage to become a player in the European biomethane market in just a few years. Moreover, priority should be given to meeting domestic demand. Biomethane should become both a means of ensuring energy independence and a means of decarbonization, increasing the competitiveness of national industry in the European market», – Valerii Bezus noted.
For Ukraine, with its developed agricultural industry, the development of biomethane is an opportunity to promote a new export industry, turning unnecessary agricultural residues and household waste into a new export product, – says Willem Coppoolse, Group Director of Energy Resources of Ukraine (ERU).
«European consumers and energy suppliers have a strong interest in biomethane due to local and European legislation requirements. For example, there is a quota for using biomethane for heating in Germany. Accordingly, energy suppliers such as RWE, Uniper, Vattenfall, and ENGIE buy and sell a mandatory ratio of biomethane to their customers. For producers and sellers of biomethane in Ukraine, access to exports is essential to ensure future returns for investors and lenders. Long-term contracts with European consumers allow banks and investors to finance biomethane projects and attract new investments even during the war. That is why it is important to guarantee the possibility of exporting biomethane. We hope that the launch of the first biomethane plants and the first export operations will become possible as early as 2023», – said Willem Coppoolse.
According to the Bioenergy Association, the potential for biomethane production in Ukraine is 9.7 billion cubic meters per year. A significant deterrent to development today is war – investors do not dare to build new biomethane plants under martial law, – says Georgiy Geletukha, Head of the Board at UABio.
«However, already this year, it is expected to launch the production of biomethane by «Hals-Agro» in the Chernihiv region (up to 3 million cubic meters per year) and the Yuzef-Mykolayiv Biogas Company in the Vinnytsia region (up to 10 million cubic meters per year). In 2023, 5 more manufacturers will join them. After the end of martial law, we expect a boom in the development of biogas plants in Ukraine. Seventy-seven biogas plants already produce up to 260 million cubic meters per year, of which it is possible to have about 150 million cubic meters of biomethane annually.
According to our calculations, by 2030, Ukraine will be able to completely reduce/replace imported natural gas by up to 10 bcm per year and become energy independent in terms of natural gas. As for entering the European market, Europe is interested in buying Ukrainian biomethane, which is more at the cost of natural gas + a premium for sustainability. If biomethane is produced from waste, the premium alone can be up to EUR 400/1000 cubic meters of biomethane, and if from corn silage, sugar beet pulp, and similar «non-waste» – up to 100 Euro/1000 cubic meters of biomethane», – said Georgiy Geletukha.
It is now that we should invest in Ukrainian gas production to direct the profits to the development of biomethane and other green technologies and, thus, reduce gas imports, – says Oleksiy Ryabchin, CEO Advisor to the Chairman of the Board of NJSC Naftogaz of Ukraine.
«Now, with high prices for natural gas, biomethane is competitive so that such projects can be profitable. However, ways should be sought to make biomethane more competitive by, for example, attracting investments and concessional financing, reducing the cost of connecting to networks, and reducing the cost of equipment. It is necessary to reduce the cost of biomethane projects through consolidation, clustering», – said Oleksiy Ryabchin.
Among the potential consumers of biomethane, we should single out companies that have a residue of agricultural raw materials, consumers who will use it on burners (at the same time, they may not even know that they are consuming biomethane molecules) and, directly, Europeans, through the sale of fuel abroad with a green premium.
«I am sure that by 2030 Ukraine will take its rightful place among the producers and suppliers of green and low-carbon gases in the EU, replacing natural gas from the russian federation», – the expert adds.
The primary motive for introducing biomethane capacity today is to strengthen our energy security. Any additional energy carrier will be helpful and will create safety stock for the heating period. Up to the moment when the first biomethane production facilities are put into operation in Ukraine, there will be a crisis demand for gas, and it is biomethane that will serve our national interests and can help Europe to decarbonize and de-russify the energy sector, – believes Mykola Kadenskyi, Head of the Network Development Division at Gas TSO of Ukraine.
«I do not exclude a possible scenario when the difference between demand and own production of traditional gas in 5 years will be fixed at the level of 1 billion cubic meters, which can be covered by biomethane. We can see that in France, for example, the target of 10% of own gas consumption due to biomethane by 2030 is an effective instrument for public policy targeting. For us, it could be 5%.
Strategies for developing biomethane programs are inherent to gas importers and to recognized world leaders, such as Chevron in the United States. The general plan of the concern is a 10-fold increase in biomethane production by 2025. Their joint venture Brightmark is currently investing in constructing ten biomethane plants in different states – Florida, Iowa, Wisconsin, and Tennessee. In Ukraine, biomethane consumers will be traditional natural gas consumers because this gas must meet the requirements of the GTS Code. The only difference is the possibility of obtaining a guarantee of origin, allowing the consumer to implement strategies to decarbonize their supply and production chains under EU legislation. We, Gas TSO, do everything necessary to ensure that both traditional and biomethane producers have access to our infrastructure.
Even a GTS operator can become a consumer of biomethane and buy it for their own needs while reducing their carbon footprint. Also, biomethane can contribute to the replacement of a scarce diesel (which the Armed Forces of Ukraine need so much now) and be used in a widespread network of NGV-refueling compressor stations», – said Mykola Kadenskyi.