EU’s green gas growth endures as 2023 output reaches 7% of demand: EBA

Continued investment and optimization of market and regulatory conditions will be vital in maintaining the growth of biogases in Europe, as production levels reached some 7% of natural gas consumption in 2023, according to data from the European Biogas Association.

Europe's combined biogas and biomethane production amounted to 22 Bcm last year, more than the inland gas demand of Belgium, Denmark and Ireland combined, according to the EBA's latest Statistical Report, published on Dec. 4.

Biomethane production alone was reported at 4.9 Bcm in 2023, the biggest year-over-year rise in production on record for the EBA, up 21% in the EU versus 18% in Europe. This was led by Italy, France, Denmark and the UK, the report noted.

Installed biomethane production capacity as of the first quarter of 2024 had risen to some 6.4 Bcm/year.

In terms of end-uses, some 23% of biomethane produced in Europe last year was used for transport, around 17% in buildings, 15% for power generation and 13% for industry, according to EBA data.

"Europe's greatest resource for reducing reliance on outside energy providers is a combination of all renewable energy sources, including biogases," Harmen Dekker, EBA's CEO said. "Thanks to their flexibility, energy storage capacity, and ability to generate dispatchable power, biogases support and facilitate growth in other renewables."

Dekker noted some Eur27 billion ($28.3 billion) of private investment would flow into the biomethane sector alone by 2030, while the association's 2040 projection sees biomethane production at up to 101 Bcm in the EU, covering some 80% of EU gas consumption.

Planned investment is expected to yield a total added capacity of 6.9 Bcm/year of biomethane, 6.3 Bcm of which will be within Europe, and in use by 2030. This translated to around 950 biomethane plants expected to begin operations over the next five years, according to the EBA.

In 2023, around 200 new biomethane plants were launched, representing a total of 1,510 plants in Europe and 1,324 in the EU-27.

This comes as the EU targets a cumulative production target of some 35 Bcm/year of biomethane by 2030, as part of its REPowerEU initiative launched in 2022. Achieving this, however, would require a sustained growth rate of 35.9% per year, according to the EBA.

Out of a total of 26 draft and final National Energy and Climate Plans (NECP) in the EU, the EBA noted that almost all mentioned biogas and biomethane in their 2030 targets.

Approximately 18 included either a biomethane or generic biogas target, while 13 countries included a biomethane target in their draft plans, amounting to 14.6 Bcm/year in production. This represented a growth rate of 19.3%.

"Coherent planning of biomethane potential and faster permitting procedures are the first steps to encouraging the market and project developers to operate at a significantly quicker pace," the EBA said in the report.

Biomethane guarantees of origin (GOs) prices have maintained their decline in recent months, on the back of weak demand. Platts, part of S&P Global Commodity Insights, assessed the German spot biomethane GO price at a record low of Eur18.275/MWh on Dec. 3, down by 0.14% on the day.

It assessed the Dutch spot GO equivalent at Eur18.075/MWh over the same period, and the Danish spot GO price at Eur12.90/MWh on Dec. 3.

Bio-LNG potential

Continued growth in bio-LNG was also expected to have a cascading effect on Europe's decarbonization goals, as a growing appetite for biomethane within transport emerges across the Continent.

There are currently 14 countries in the EU producing bio-LNG, with around 59 active bio-LNG plants across Europe, the EBA noted.

"By 2027, we will see [an additional] 105 bio-LNG plants which is set to add 13.1 TWh/year of production capacity," Pablo Molina, technical and project officer at the EBA said. "80% of these volumes will be used in road transport, specifically heavy duty."

Molina added that given the difficulty of electrifying the transport sector, the industry had recognized the importance of bio-LNG. The shipping industry would also be looking to bio-LNG to meet sustainability goals, he noted.

In 2023, 59 bio-LNG plants were developed with around 8TWh/year of capacity. This is expected to grow to 105 plants for all of 2024 with a combined capacity of 15.1 TWh/year before eventually hitting the 134 plants for 2027 with capacity of 21.1 TWh/year, EBA data showed.

This comes at a time when spot prices for European bio-LNG remain elevated. Platts assessed the Rotterdam Bio-LNG assessment at Eur86.987/MWh on Dec. 3. Bio-LNG prices have risen Eur10.156/MWh since the assessment launch on Nov. 1.

In comparison, this was a Eur39.129/MWh, or $12.052/MMBtu, premium versus the Platts Northwest European LNG marker and around a Eur38.5/MWh premium versus the Dutch TTF gas hub.