PPE 2020: what prospects for the biogas sector? COMMENTS
Lighting by Laure-Aline Baheux and David Musoni, consultants at Wavestone.
Biogas is a renewable gas that is obtained from a natural process: the fermentation of organic matter in the absence of oxygen (anaerobic). The production of biogas consists in using this process to recover organic waste from the agricultural environment (manure, residues) or urban (sludge, food waste).
For several years, the biogas sector has been developing in France thanks in particular to the appearance of new outlets (injection, biofuel) and new processes (cogeneration, pyrogasification, hydrothermal gasification, power-to-gas).
In France, one of the main processes is anaerobic digestion, which uses micro-organisms (digestion) to transform organic waste into biogas.
Source: Analysis of the biogas sector, Wavestone, April 2021
Anaerobic digestion is the most mature means of biogas production in France, while the other production processes are still mainly at the development stage.
In terms of uses, the injection of biomethane into the network has so far been favored by the government, due to a higher energy yield than that of electricity produced by cogeneration[i] (94 % versus 35%).
With 828 biogas facilities for electricity production and 139 biomethane facilities, growth in the sector was maintained in 2020. However, the recent development of the Multiannual Energy Program (PPE) and the related crisis to COVID-19 could halt this trajectory.
Feedback on the reactions and solutions proposed by the players in the sector.
Where is the biogas sector?
Following the Energy Transition Law (LTECV), published in August 2015, the PPE of 2016 has set itself the task of setting the trajectory of France regarding the energy mix. The objectives to be achieved were 237 to 300 MW of electrical power from methanisation installed by 2023. At the end of the first half of 2020, it had reached 220 MW.
Concerning biomethane, support mechanisms were gradually introduced, then the PPE defined grid injection targets for its development, as summarized in the timeline below:
Thus, most regions have seen strong growth in the number of biomethane units in recent years; include, among others, Ile-de-France, Grand-Est, Hauts-de-France and Brittany.
This is explained by the presence of inputs, the typology of gas networks and territorial policies. Indeed, the National Biomass Mobilization Strategy (SNMB) and the Methanization Strategic Roadmap (ADEME) have supplemented the PPE. The national strategic axes were then declined at the regional level – Regional Biomass Scheme (SRB), Regional Climate Air Energy Scheme (SRCAE), etc. – and territorial.
How has the framework of the sector evolved in recent months?
In April 2020, a new PPE was adopted in order to adjust the trajectory of France's energy policy in setting new goals for the next 10 years.
It plans, among other things, to reduce final energy consumption (-20% in 2030), in particular the consumption of carbon energies (-40% in 2030), and to increase the share of renewable energies in final consumption to 33% by 2030.
As regards biogas, the new PPE presents a production and injection trajectory into the network with lower targets than the 2016 PPE and the LTECV published in 2015.
Indeed, the new PPE wishes to increase the share of renewable gas in total gas consumption in France to 7% by 2030, while the LTECV provided in 2015 a target objective of 10% by this same horizon. In addition, the targets for injecting and producing biomethane in the networks have been revised downwards:
The objectives of the PPE 2020 relating to the injection of biomethane:
Sources: Monitoring Observatory[ii]
The challenge of reducing production costs
Currently, producers wishing to inject biomethane into the distribution network are all eligible for a purchase obligation, the price of which is set in advance and around €100/MWh. This makes it possible to cover the costs linked to the production of biomethane, which are approximately 4 times higher than those of the production of natural gas (approximately €23/MWh).
The new 2020 PPE provides for a reduction in biomethane purchase tariffs and the establishment of a tendering system in order to force biomethane producers to reduce their production costs [iii] .
The objective is to reduce the cost of biomethane production to an average of €75/MWh HCV in 2023 and to €60/MWh in 2030; an ambitious target which presupposes activating certain levers, such as improving the quality of inputs in order to optimize the performance of methanisation units, the standardization of installations to reduce production costs or even the optimization of biogas production.
Reducing production costs means revising the development of the biogas sector downwards, because the financial control required will have repercussions on the development of projects and ultimately slow down the growth of the sector. It is in this logic that the new PPE presents objectives for the production and injection of biogas that are lower than those of the previous political and regulatory texts.
How are the players in the sector reacting to changes in the PPE?
The main players in the biogas sector (federations, associations, distributors) have deplored this drop in the objectives set out in the PPE for 2020. These objectives, which are less ambitious than those resulting from previous legislative texts (PPE 2016 and LTECV 2015) have raised fears of a halt to the development of the biogas sector. While it is difficult to measure the impact of this decline, it is clear that the growth of methanizer installation projects is likely to decrease and slow down the overall development of the sector.
In addition, many biogas players, such as the agricultural union FNSEA or the France Gaz Renouvelable association, have expressed reservations about conditioning biomethane production targets on lower production costs, whether they considered unattainable in the time allowed.
According to the Biogaz Vallée cluster, the development of the biogas sector should be based on a gradual and less drastic reduction in purchase prices and production costs.
This cost reduction can be achieved by increasing the volume of production (number and size of units) which will allow economies of scale. Thus, for biogas players, it is important to include the development of the sector over a long period of time, and to include objectives that are better correlated with the reality on the ground.
In response to the new PPE for 2020, the environmental association ATEE, which brings together the main French biogas players through the Club Biogaz, has published a series of proposals aimed at continuing the development of renewable gas production sectors ( anaerobic digestion, pyrogasification and Power-to-gas).
Among these proposals, we find the desire to increase the injection of biomethane into the network by increasing the volume of production (with 3,000 methanizers by 2030), to facilitate the financing of methanization projects, and to organize an innovation ecosystem around green gases.
It will require time, financial means and public support to develop national production of biomethane and thus achieve the initial objective of 10% renewable gas in final consumption.
A promising future
Like most industrial sectors, biogas production has been impacted by the COVID-19 epidemic. In this context, delays are expected in the deployment of new methanization projects, which is synonymous with a slowdown in growth. Despite this, the future of the biomethane sector in France remains promising.
In recent years, the number of biogas projects has increased considerably in all regions. At the end of September 2020, there were nearly 1,150 projects on hold, totaling a production capacity close to 26 TWh/year, i.e. 8 times the current capacity.
The development of new anaerobic digestion projects is driven by the territories that are using this technology to meet local challenges in waste management, the fight against climate change and job creation.
Like the collective Prometha (Ile-de-France), Métha'Synergie (South Region), or Méthalantique (Pays de la Loire), the regions are getting organized to strengthen local alliances and coordinate the development of sector.
In addition, call for projects schemes such as the AAP set up by ADEME, make it possible to support numerous anaerobic digestion projects and technological innovation in the sector.
However, high production costs are still an obstacle to the development of the sector. While the sector is aware of the challenge of reducing production costs, it is however concerned about the solutions proposed by the PPE.
According to the actors, the current system must be accompanied by an extra-budgetary funding mechanism (obligation to produce or purchase biomethane) and long-term visibility in order to strengthen the mobilization of funders, and ensure the development of new projects.
[i]Cogeneration: The principle of cogeneration consists in producing mechanical energy (converted into electricity) and heat at the same time and in the same installation and from the same energy source ( co = together; generation = production).
[ii] https://www.energylab.sia-partners.com/observatoire-biomethane-2020
[iii] https://www.ecologie.gouv.fr/sites/default/files/20200422%20Programmation%20pluriannuelle%20de%20l%27e%CC%81nergie.pdf p.105
[iv] https://www.linfodurable.fr/environnement/le-biogaz-en-plein-essor-la-filiere-appelle-letat-maintenir-son-soutien-24911