Is biogas sustainability an acquired taste or a mandatory and extra workload in an already regulated sector? Whatever the answer, we would like to share a few things about the sustainability of biogas and therefore biomethane.
The sustainability of biomethane is based on the obligation under the RED II Directive, which is monitored in Finland by the Finnish Energy Agency. In short and simplified terms, the producer must demonstrate that the reference figure for emissions from the biomethane/biogas production chain must be lower than the emission reduction of the fossil fuel used for the comparison. Simple and clear. But maybe not. Let's take an example: biogas plant A produces biomethane for transport fuel. The plant is completed in 2020. The plant has not done a sustainability calculation, so they don't know if the plant will meet the Energy Agency's requirement. Since the plant is completed in 2020, the emission reduction of the plant should be at least 60% lower compared to fossil gasoline. The benchmark for petrol is 94 g CO2eq/MJ. To meet the RED II Directive, the plant should have a minimum of 40 % lower emissions in the production chain than petrol. That is, less than 37.6 g CO2/MJ.
So what does that figure actually affect? It has an impact in many ways. If you are a biogas producer who wants to distribute biomethane to industry or transport for fuel, there are tax implications if you do not meet the Energy Agency's requirements. If the utility wanted to sell its product for transportation and the requirement was not met, then in effect the distributor would then be distributing natural gas and would have to purchase the percentage of renewable shown in that year's distribution obligation from the market to meet the requirement under the Distribution Obligation Act. The above has a major impact on profitability because, if a producer could distribute biomethane, then once the producer has met his share of the distribution obligation, he could sell the rest of the labels to another party under the Distribution Obligation Act and make a financial profit from there. Now, if the emission reduction is not met, the situation is reversed.
If the gas produced were sold to an ETS operator and the gas did not meet the requirements, then the operator would effectively be buying natural gas, which would have an economic impact on the operator due to the different tax treatment. In addition, the operator's emissions would increase significantly and the operator could then have to buy more allowances on the market to cover the increased emissions, creating upward pressure on costs. If and hopefully when the gas qualifies, then the overall emissions of the gas purchaser are likely to decrease compared to the baseline, and they may even sell their allowances to the market and thereby gain an economic benefit. This is why there is a good market for sustainable biomethane and why gas buyers also ask and demand to know the emission factor, even an indicative one, in order to be able to price the product correctly.
If, on the other hand, the producer is a farm, for example, which produces electricity and heat from gas for its own needs. If the production exceeds the small producer's limit of 1 GWh, then the biogas used for heating will be subject to a tax of €10.33/MWh for gaseous fuels. If the sustainability of biogas can be demonstrated, the tax for heating will fall to the minimum level of 1.2 €/MWh under the Energy Tax Directive, and the carbon dioxide tax will fall from 12.94 €/MWh to zero, so that the total tax revenue would be 23.354 €/MWh for non-sustainable biogas and 1.284 €/MWh for sustainable biogas.
In practice, you can do the calculation if you know a few basic steps. Inputs and where they are generated, the plant's own energy use and the end uses of the final products. The calculation can be used to show the figure described above. In order to comply with the legislation, a sustainability scheme must be established for the producer to demonstrate that the operator is operating in such a way in his daily activities that the gas produced actually meets the requirements of the legislation. At Biovoima, we can help with both the calculation and the construction of the sustainability scheme, whether you are a new operator or the owner of an existing plant.
Quality, Environmental and Project Engineer, Suomen Biovoima Oy
Aki Heinonen, Finnish Biovoima Oy
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