INTERVIEW: Ukraine eyes EU biomethane export growth in ambitious scale-up plans: UABIO

Ukraine is planning to intensify biomethane exports to the EU, aiming for a 10%-20% share of the market by 2030, according to the Bioenergy Association of Ukraine (UABIO).

It comes as the EU eyes a near-eightfold increase on its production capacities of the renewable fuel by 2030. As it looks to simplify cross-border trade to achieve its own ambitious goals, least-cost suppliers like Ukraine are poised to help it deliver.

In an interview with S&P Global Commodity Insights, UABIO Chairman Georgii Geletukha said Ukraine was well-positioned to meet Europe's growing demand for renewable gases.

"Biomethane will be a leading renewable fuel in 10-20 years, and Ukraine is ideally positioned to produce and export it," Geletukha said.

The development of biomethane in Ukraine began in autumn 2021 when parliament approved legislation to decarbonize the gas grid.

Founded in 2013, UABIO became the leading body for lobbying sector interests, developing feasibility studies, and exploring project implementation before the war with Russia broke out in February 2022.

Progress was limited in 2022, but interest surged in 2023 with the launch of the first biomethane plant in the Chernihiv region, converted from an existing biogas facility.

As Geletukha noted, however, it made no economic sense to produce biomethane in 2023 "because exports were not permitted. Additionally, within Ukraine, it was only possible to sell biomethane at the price of natural gas."

In 2024, Ukrainian biomethane projects advanced significantly, with new plants developed in the Dnipropetrovsk, Khmelnytskyi, Kyiv and Vinnytsia regions. By September 2024, biomethane exports were permitted, following a special customs clearance order from Ukraine's finance minister, paving the way for cross-border exports to commence in November 2024.

UABIO anticipates five additional biomethane projects will begin production by the end of 2024, along with two bio-LNG facilities. However, despite Ukraine's advantageous position, extensive agricultural capabilities, and mature gas transmission network, the industry faces obvious challenges in war-torn Ukraine.

Geletukha said the ongoing Russian invasion could limit investment potential in the sector, noting profitability in Ukraine's agricultural sector -- especially wheat, corn, and sunflower oil -- had been hit.

Nevertheless, biomethane presented a positive business case in Ukraine, as most prospective production sites are near the developed gas network.

To galvanize the sector, UABIO has recommended simplifying grid connections, certificates and feedstocks in line with the EU's Renewable Energy Directive (RED III).

On Nov. 7, 2024, Ukraine's energy regulator issued a resolution to amend gas distribution systems, simplifying technical conditions for connecting biomethane facilities to the distribution network.

"We are collaborating with the regulator to strengthen the integration of the Ukrainian biomethane market into the EU market," Mykola Kolisnyk, Ukraine's Deputy Energy Minister, said.

This initiative coincides with the EU's planned launch of its Union Database (UDB) for biofuels and bioliquids, aimed at tracing liquid and gaseous fuels in the European market, set to launch Nov. 21.

Geletukha said UABIO and the Ukrainian government are working directly with the European Commission on frameworks for Ukraine's involvement in the UDB, although clear instructions on registration within the system have yet to be received.

European biomethane Guarantees of Origin have been trading near record lows, with Platts, part of S&P Global Commodity Insights, assessing the German spot biomethane GO price at Eur18.925/MWh ($19.74/MWh) on Nov. 21, up by 0.1% on the day.

Export targets

Despite the ongoing conflict, challenges of scale remain significant for UABIO's ambitious production targets, which aim for approximately 20 Bcm of biomethane production by 2050.

These targets would require around 4,000 biomethane plants and approximately Eur40 billion in investments through 2050, according to UABIO data.

"I believe this target is absolutely realistic," Geletukha said. "However, if the war continues, reaching this target becomes more difficult. It's worth noting that most of Ukraine's existing projects were launched during the war."

Of the total production, around half is expected to be exported, potentially reaching 10 Bcm by 2050, based on UABIO's estimates.

Neighboring EU countries could greatly benefit from Ukraine's biomethane, particularly as compliance markets mature and the bloc pursues biomethane as an alternative to conventional gas.

The EU has set a non-binding target to achieve 35 Bcm/year of biomethane output by 2030, which represents nearly an eightfold increase from current levels estimated at around 4.5 Bcm/year, according to the European Biogas Association.

Biomethaverse

In alignment with Europe's biomethane ambitions, UABIO has ensured that Ukraine's operational facilities are certified by the International Sustainability and Carbon Certification (ISCC) scheme.

The association is also part of the Biomethaverse initiative, a EU co-funded project aimed at diversifying biomethane production technology across five countries: France, Greece, Italy, Sweden and Ukraine.

"This is a significant project," Geletukha noted. "The idea is to capture the CO2 produced alongside biomethane."

The project aims to enhance the cost-effectiveness of biomethane production in Europe and promote its uptake. Demonstrators will work on transferring CO2 effluents from anaerobic digestion and gasification processes, combining it with renewable hydrogen to increase overall biomethane yield.

UABIO's responsibility includes reporting on Ukrainian biomethane progress to the project, while co-partner MHP Eco Energy will oversee technical aspects from its laboratory and operational demonstration site.

"Our involvement in analytics, advertising and lobbying is crucial," Geletukha added. "We are pleased to have a strong partner in MHP and hope to engage in similar projects in the future."