Support Mechanisms for Biomethane Production and Supply

Abstract

Biomethane can be produced from biogas by upgrading it to the quality of natural gas. This way it is possible to obtain a renewable substitute for the natural gas which may be injected into the natural gas grid and used in the existing technologies without need for replacement. Biogas, after purification, can be diverted from distributed biogas-fired power plants which often are relatively inefficient due to lack of sufficient heat loads to large district heating systems with efficient cogeneration possibilities. The research question of this study was: what is the level of support required for the production of biomethane in order to put it in price parity with natural gas, and how should a support policy for biomethane supply chain be designed to make it sustainable over time? The methodology used was system dynamics modeling with data obtained from public authorities, biogas industry and scientific publications. The studied time horizon is 2017–2030 and the model is tested for the case of Latvia. The novelty of the approach is more detailed modeling of support policy by including issue of support allowances and physical construction of biomethane production capacities. The aim of the model is to provide policy makers with the tool which allows organizing support in a well–controlled manner over a sufficiently long time period considering economic and technical constraints. The results show that the average level of support required for biomethane as a feed-in-premium payment on top of the unit production costs is circa 68 EUR/MWh under the most favorable scenario. The analysis suggests that the period of support should be extended from the present 10 years to 15 years or more to decrease the required average feed-in-premium payment.