Ukraine has the potential to become a European leader in biomethane production
What are the obstacles and how to overcome them?
russian aggression does not hinder the creation of a biomethane industry in Ukraine, which is capable of turning domestic farmers into gas exporters. According to the Bioenergy Association of Ukraine, five plants producing this 'green' gas will start operating in the country in 2023. The first of these, with a capacity of 3 million cubic metres, was opened in April by the company Hals-Agro in the Chernigiv Oblast.
The production of biomethane from agricultural waste creates a new type of business for farmers that is not dependent on logistics, the problems with which currently prevent the effective export of grain and other products. Biomethane export (physical and virtual) can be carried out through the existing extensive gas transportation system. Therefore, Ukraine’s Gas Transmission System Operator considers this industry in their plans for gas pipeline development.
However, there are obstacles that can, if not block, significantly delay Ukraine's transformation into a European leader in biomethane production. Georgiy Geletukha, the Chairman of the Board of the Bioenergy Association of Ukraine public association, told Mind about the potential of this new export industry in the country, as well as how to prevent a negative scenario for its development.
Investments in Ukraine's export-oriented industries are the most promising. One such industry could undoubtedly be the production of biomethane – a combustible gas obtained from biomass and brought to the quality of natural gas. Biogas plants produce biogas with a composition of approximately 55% methane (CH4) and 45% carbon dioxide (CO2).
What is biomethane?
Biomethane is a type of biogas from which CO2 has been separated, and which contains up to 95-96% methane. It is a renewable gas and its use significantly reduces greenhouse gas emissions.
That is why there is a huge demand for it in EU countries, which have set the goal of reducing greenhouse gas emissions to almost zero and becoming a climate-neutral continent by 2050. In particular, the EU plans to increase biomethane production from 3.5 billion cubic metres in 2022 to 35 billion cubic metres in 2030 and to 125 billion cubic metres in 2050.
What are the advantages of biomethane?
Biomethane, derived from agricultural waste, is ready to be injected into the gas grid without requiring investments in upgrading gas distribution or transportation systems, or gas equipment such as burners, engines, or turbines.
Ukraine has developed gas distribution and transportation systems, and gas pipes can be found in virtually every part of the country, making it possible to deliver produced biomethane.
Moreover, biomethane is the cheapest of all possible renewable gases. The cost of selling biomethane, at which it is profitable to produce, amounts to 800–900 euros per 1000 cubic metres. In the EU market, biomethane prices reach up to 1200 euros per 1000 cbm.
Biomethane plants also generate digestate (residue from production), which can become the main organic fertiliser for reviving Ukrainian soils.
Biomethane creates an additional source of gas that the Ukrainian gas transmission system can transport in case of a halt in the transit of russian gas. It will significantly facilitate the delivery of natural gas to Ukrainian consumers if this scenario becomes a reality.
Where biomethane can be 'extracted' from in Ukraine?
Ukraine has the largest area of agricultural land in Europe and, accordingly, one of the best potentials for agricultural raw materials for biomethane production in the world. Given the biomass from cover crops that can be grown on 20% of arable land, the potential for biogas production in Ukraine reaches 21.8 billion cubic metres per year.
Cover crops are crops that can be grown between the harvesting and sowing of two main agricultural crops during the period when the land is fallow. Rye or silage corn are considered such crops.
Biomethane production potential in Ukraine, bcm/year
Why is it particularly relevant to develop biomethane production now?
The prerequisites for the emergence of a new industry capable of turning farmers into gas exporters were created in October 2021, when the Law of Ukraine on Biomethane Production was adopted. This document opened up opportunities for production and injection into gas pipelines.
In April 2023, the first biomethane plant in Ukraine, owned by Hals-Agro, started operating in the Chernigiv Oblast. It will produce 3 million cbm of biomethane per year.
The potential domestic biomethane industry could meet up to 20% of the EU's needs.
Proposed scenario by the Bioenergy Association of Ukraine for the development of biogas production in Ukraine up to 2050 (billion cbm)
What hinders the industry from developing?
All the listed opportunities may remain as projects due to one problem – if government officials do not unblock the possibility of exporting Ukrainian biomethane to EU countries.
At relatively low prices for natural gas, which have been formed after the end of the heating season (about 450 euros per 1000 cbm), biomethane at a price of 800-900 euros/per 1000 cbm cannot compete with natural gas in the Ukrainian market. Currently, it is profitable to produce it only for export. However, this option is currently blocked.
The uncertainty of government officials regarding the possibility of biomethane exports remains a separate political issue. Therefore, investors and potential buyers of Ukrainian biomethane in Europe lack confidence in concluding contracts with national producers.
How to overcome this?
The initial problems are technical in nature and require amendments to the subordinate acts regulating customs procedures. In particular, a new option should be added to the list of goods for customs clearance – biomethane.
Changes are also needed to the Ministry of Finance Order No. 629 dated May 30, 2012 "On Customs Formalities for Pipeline Transport and Power Transmission Lines." The word "biomethane" needs to be added to the document text so that the TSO can distinguish between natural gas and biomethane in the gas transportation system.
What will this give us in the future?
The potential production volumes of biomethane from five plants that plan to start producing it in 2023 are about 70 million cbm per year. Ukraine currently consumes about 20 billion cbm of natural gas. Therefore, we are talking about exporting biomethane within 0.4% of natural gas consumption, which will not affect Ukraine's energy security during a state of war, but its unlocking will be the first step in building a new export-oriented industry in the country.
The issue of producing and exporting biomethane has strategic importance for Ukraine. It will contribute to attracting investment in the agricultural sector, creating new jobs, increasing tax revenues to local and state budgets, as well as increasing export currency revenue. Therefore, it is extremely important for the government to urgently intervene and make a political statement regarding the possibility of such export.
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