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Biomethane in Europe: promising investments but challenges ahead

The European biomethane market is booming, but it may struggle to meet its ambitious production targets due to various regulatory, logistical and economic hurdles.

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The European biomethane market is expected to grow substantially in the coming years due to the European Union’s (EU) energy independence and investors willing to step up, but is likely to fall short of production targets due to changing use cases, the uneven distribution of current projects, and regulatory challenges.

The European Union’s REPowerEU plan to wean itself off Russian gas includes a target of producing 35 billion cubic meters of biomethane from agricultural waste and residues by 2030, up from 3 billion cubic meters currently.

Biomethane in Europe: a difficult challenge

However, according to an analysis by S&P Global Commodity Insights, Europe is not on track to achieve this goal. While biomethane may become an increasingly attractive asset class, a target of 35 billion cubic meters is high and requires 11 times the growth of today. However, progress can be made by upgrading the biogas used for electricity and heat production to biomethane. However, this would only be half of the target at best.

Biogas and biomethane production is generally a small part of European companies’ strategies, unlike other renewable energy sources.

Biomethane in Europe is still limited

Biomethane business varies from one EU country to another due to the regulatory approach taken. Countries like Germany, France, Denmark and the Netherlands offer feed-in tariffs or premiums, while Italy has one of the most generous subsidy programs.

Biomethane production remains concentrated on agricultural sites, local wastewater treatment plants or biorefineries, which limits the opportunities for investors. The potential for biogas and biomethane is mainly related to the availability of feedstocks, such as animal manure, biowaste and plant waste, as well as their volume, price and location. While the EU’s goal is achievable, it is not sufficient to drive the necessary investments. Biomethane is a technology that requires time and investment.

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