What is Biomethane?

Biomethane is an upgraded form of biogas. Biogas is produced by the anaerobic digestion of organic materials such as food waste, sewage sludge and agricultural feedstocks. An anaerobic digester ("AD") plant is used for this process. Biogas can then be upgraded to biomethane by removing impurities, resulting in a high-quality renewable gas, which can be exported to the national gas network. 

Why is Biomethane important?

Ireland's energy industry currently relies heavily on imported fossil gas, with approximately 75% of Ireland's gas consumption being imported from the UK in 2023. Biomethane, a renewable alternative, holds great promise as a direct substitute for fossil gas, especially in decarbonising hard-to-abate sectors such as heavy-duty transport, high-temperature industrial processes, and the built environment. Biomethane can significantly contribute towards our renewable energy targets and enhance security of supply. Despite Ireland's strong potential to develop an indigenous biomethane industry due to its reliable supply of agricultural feedstocks, the industry is still in its infancy, with only two operational AD plants currently injecting biomethane into the national gas network. 

What does the Strategy aim to do for Biomethane in Ireland?

The Strategy's primary objective is delivering on the Government's 2030 biomethane production target of up to 5.7 TWh per annum. It will achieve this by delivering on a total of twenty-five actions ranging from new support measures to implementing policy enablers. Four key features in the Strategy, discussed below, are the approach to deploying the sector, sustainability, financial supports and policy enablers. 

1. Dual Approach to Deploying the Biomethane Sector

The Strategy sets out a dual approach of 'Economic Deployment' and 'Widespread Deployment' for deploying Ireland's biomethane industry. 

• Economic Deployment, which envisages the development of a smaller number of larger AD plants (with an average size of 40 GWh) injecting directly into the national gas network, is seen as the most economic and cost-efficient pathway for developing a biomethane industry. Larger AD plants benefit from economies of scale, lower off-take prices and require less infrastructure.
• Widespread Deployment sees the development of numerous smaller, farm-scale AD plants. Most of these plants will need to transport their biomethane to centralised gas injection facilities. This element engages rural communities and farmers directly in the biomethane industry, supporting the Strategy's aim of being 'agri-led' and farmer-centric.  

2. Sustainability

Promoting a sustainable biomethane industry is a key feature of the Strategy and comprises a number of elements including:

• Sustainability Charter: A Biomethane Sustainability Charter will be established, which will apply to all biomethane projects that are receiving Government support or operating under the renewable heat obligation or "RHO" (discussed below). This charter will outline key sustainability requirements for industry participants;
• Regulatory Compliance: For biomethane from AD plants to be classified as a zero-carbon fuel, compliance with strict sustainability criteria in the Renewable Energy Directive ("RED") II and RED III must be met. Communicating these sustainability requirements to potential developers will be a key part of communications planned around the Strategy and an online information hub will be established to share information, guidance and best practice around sustainability. Best practice guidelines around methane leakage for the biomethane sector will also be assessed; 
• Ensuring Sustainable Lifecycle: The Strategy focusses on the importance of sustainability in the lifecycle of biomethane production, both in terms of feedstock used and in the sustainable management of digestate. A Biomethane Implementation Group will be tasked with advancing sustainability in both areas; and
• Renewable Certification: The Strategy highlights the ongoing development of regulatory arrangements for issuing Guarantees of Origin (GOs) for renewable gas, which disclose the origin of the renewable gas to the end-consumer. Further, there is a need for a certification mechanism for biomethane not injected into the national gas network. Implementing these arrangements is important, particularly in the context of entering into gas purchase agreements with corporate consumers ("GPAs") seeking GOs to meet sustainability goals. With rising corporate demand for renewable gas in Ireland, GPAs will likely be an important 'route to market' for AD developers. 

3. Financial Support Mechanisms

The Strategy identifies a capital grant fund and a renewable heat obligation ("RHO") as the optimal support measures to stimulate the immediate development of the biomethane industry and achieve the 5.7 TWh production target by 2030. Notably, ongoing pricing support in the form of a feed-in-tariff, which has been successful in other EU countries (e.g. Germany), was not chosen due to the lengthy implementation process involved, which would not align with the Government's 2030 target. 

• Capital Grant Support: An initial capital grant fund valued at €40 million is expected to be introduced this year for early-stage developments. These grants aim to support developers with the significant capital investment costs associated with AD projects. Further detail is expected in the coming weeks, however the Strategy indicates new AD projects must have full planning permission and permitting in place in order to be eligible for the initial grant. Given current timelines associated with planning permission and permitting requirements, it is possible that only a few AD projects will be eligible for a grant when introduced later this year. Operational AD plants looking to upgrade their facilities to produce biomethane will also be eligible to apply for capital grants. A second round of capital grant funding will be introduced from 2026. 
• Renewable Heat Obligation: A RHO will be introduced by the end of 2024. The RHO will require suppliers of fossil fuels used for heat to ensure a proportion of the energy they supply is renewable, thereby increasing the demand for biomethane in Ireland. A key challenge in implementing the RHO will be setting the right annual obligation rate. The rate must be high enough to increase demand for biomethane and incentivise development, but also accurately reflect the available biomethane supply. The Strategy acknowledges this challenge and considers an incremental increase in the obligation rate to allow time for adequate market development.   

The introduction of these supports is a welcome development. However, the Strategy provides limited detail on the mechanisms that will underpin these supports. Industry stakeholders will welcome further information, and it remains to be seen whether these supports will become a significant enabler of biomethane projects in Ireland, as observed by our Addleshaw Goddard colleagues in Germany, where feed-in tariffs significantly jump-started the German biomethane sector some years ago.

4. Policy Enablers

The Strategy recognises the need for streamlining the development process for the biomethane sector and the important role of non-financial policy and regulatory enablers in this. Developing an AD project typically requires a range of consents from various agencies. These include planning permission and either a waste permit from a local authority, or, an industrial emissions licence from the Environmental Protection Agency, depending on the project's size. Inconsistent decision-making on planning applications and permitting delays have been an issue in the biomethane sector to date. Ensuring the relevant state agencies are adequately resourced in terms of capacity and expertise is essential for timely and adequate decisions on applications. This is recognised as a key priority in the Strategy, particularly in the context of meeting the 2030 target. 

Interestingly, the Strategy indicates that the high financial cost of gas network connections will also be reviewed. Developers seeking to connect their facility to the national gas network must currently provide a financial bond to the value of 70% of the connection fee. Further, with increasing grid development demands expected on Gas Networks Ireland in the coming years, the Strategy proposes reviewing the status of contestable connection works that may be carried out by AD developers. Such a shift towards allowing developers to carry out a substantial portion of the connection could minimise grid delays and potentially reduce connection costs so this will be an interesting development to watch. 

Conclusion

Given the biomethane industry's potential for growth in Ireland and the fast-approaching deadline of the Government's 2030 target, the Strategy is a welcome first step towards developing an indigenous biomethane industry that would reduce dependence on imported fossil gas. The announcement of proposed financial supports and the recognition of the need for streamlining the development process are welcome. However, industry stakeholders will be keen to see further detail around the support mechanisms and the rapid implementation of policy changes in the key areas in the development process, namely planning, permitting and grid connections, to inspire confidence, and hopefully deliver significant scale in the sector.