The state of biomethane plants in Italy: some considerations in view of a new decree

This article aims to examine the state of development of biomethane in Italy, object of 3 seminari on line, between October and November 2020, taking up some arguments made with Snam and Federmetano, on this occasion. More than two years after the second decree came into force and seven years after the first, the effects of which had been virtually nil.

Of course, all this time, the market has become fully aware of the reality of biomethane as an important and sustainable energy source, and there are many new economic entities that have entered this sector, whose importance has been fully enhanced by Snam, the largest national operator of the gas network.

With the second decree on biomethane, the legislator has treasured the lessons learned with the former, starting from the method. The decree was in fact born after six months of consultation with the operators concerned and has a coherent and well-articulated approach, concentrated, according to a shared logic, on the priority to the transport destination, in light of the delay in this sector, compared to other renewable energy sectors, and without forgetting the strength of the national industrial chain in natural gas transportation.

However, the balance of these two years, despite the growth in the number of plants, it remains well below the stated objectives.

Based on the Snam data, in the former 7 months of 2020 have been placed on the network 39 million Smc of biomethane, with a forecast for the end 2020 of 82 millions.

In terms of CIC (Certificates of Release for Consumption), these quantities will cover just the 30% the need for advanced biofuels envisaged by the objective of the 0,9% for the 2020.

The agricultural supply chain is missing

What is the reason for this delay? Essentially to the fact that the development of agricultural and above all conversion, in whole or in part, to biomethane of 1200-1400 biogas plants in cogeneration it is not economically convenient. First and foremost for the restrictive interpretation of the letter of the current decree on biomethane given by the GSE, regarding the sustainability criteria of the biomasses used, applied not only to biogas destined for biomethane, but also to the share of biogas that would continue to be used for cogeneration and remunerated with the all-inclusive tariff. In fact, this interpretation forces the complete transformation of the plant power plan, in most cases fed with corn, to switch to the use of by-products, energetically less efficient.

Ma, more generally, the emphasis given to the use of by-products greatly restricts the feasibility of agricultural plants, which very rarely have sufficient quantities of by-products or waste to reach sustainable investment sizes.

In summary, the development of biomethane the agricultural source of food is largely missing, that, by all estimates, represents no less than four fifths of the entire potentially producible biomethane. How to activate the agricultural supply chain in a more incisive way?

Some proposals for the new decree

  1. Facilitated conversions

The next biomethane decree should cover the time frame in which the incentives for electrical biogas will cease. Few plants will be able to continue producing electricity in the total absence of incentives. The primary objective should be to keep these plants in operation in an arrangement that favors the conversion to biomethane, in whole or in part.

  1. Incentives for smaller size plants

For example, for smaller plants, for example, below or on the threshold of 250 Smc/h, the price of the CICs could be guaranteed for a longer period, favoring the bankability of projects. This would make it possible to considerably broaden the potential market audience. Moreover, the lower efficiency of smaller plants could be offset by a better sustainability of the supply chain.

  1. Intervening on CICs

Today, as indicated above, i CIC, at the guaranteed price of 375 €, they are all placed, until exhaustion of availability, while the fact that the target set for advanced biofuels is not achieved does not entail any penalty for the Obliged Subjects (fuel suppliers). This causes the availability of advanced CICs to run out, for lack of sufficient quantities of biomethane, without the fixed price stimulating the market to increase production.

But the CICs at € 375 really favor biomethane?

The original intention of the guaranteed price of the CICs was to encourage investment. However, the lack of the obligation on the target for advanced biofuels does not allow the scarcity of advanced CICs to be offset on the price.

As the current decree is conceived, in fact, biomethane can only be advanced. In the sense that biomethane is either advanced or not really, because non-advanced biomethane is not economically feasible, being twice penalized, from the market price of biomass and the reduction of the incentive.

Currently, the CICs generated with biomethane are placed at a fixed price, however, it is not high enough to make agricultural investments economically attractive, where the biomass used always has a cost. So, while all advanced CICs are placed, the price has no regulatory function. To effectively incentivize biomethane, the fixed price should be raised to higher levels, or the percentage obligation of advanced CICs should be made mandatory. In tal modo, the fixed price would continue to play the role of guaranteeing the investment, but the market demand could help to raise the price and to make the remuneration higher.

The legislator has taken care to cover the GSE from the economic risk of the CIC market, being out of the mission of this body to exercise commercial management. But, in this way the market was prevented from exercising a regulatory function. Since the State always has the possibility to guarantee the GSE from long-term economic losses, acting on the blending percentage target for advanced biofuels, it would be advisable for a new decree to operate in both directions:

1) significantly raising the guaranteed minimum price, to facilitate the bankability of projects 2) making the obligation of advanced biofuels mandatory

In conclusion, is essential, to develop agricultural biomethane, provide for a targeted incentive for the agricultural sector and in line with the environmental objectives for the agricultural sector.

In this sense, the proposals of FIPER / Monviso Agroenergia Consortium.