On 10 July, Italy announced the results of its first capacity auction for biomethane, with approximately 320 MW of proposals being awarded. A day later, Portugal opened their first auction for biomethane supply, with 150 GWh annually up for tender.
The auction is a result of the ministerial decree on the Production of Biomethane, gazetted on 15 September 2022. The GSE, the state energy service system operator and promoter of renewable energy in Italy announced the outcome of this first auction on its website.
A total of 67 000 m3/hr (approximately 707 MW) capacity was put up for tender back in January 2023, with the procedure closing to new bids at the end of March 2023. In total, 72 applications were received amounting to approximately 36 000 m3 capacity, with 30 000 m3 of this being eventually accepted.
Municipal waste (‘FORSU’) plants are expected to be economical compared to other plant types due to larger economies of scale. This is reflected in the plant sizes – the average capacity size of the successful applications for municipal waste plants being around twice that for the agricultural waste plants – and the eligible tariffs, which receive lower tariffs (EUR per m3/hr production) than other plant types according to the decree.
While the accepted bid capacity fell well short of the total capacity on offer, four more auctions will be held, with the unfulfilled capacity from the first auction being carried over to the next. This is part of the plan laid out in the ministerial to add 257 000 m3/hr of Italian biomethane production capacity by 2030.
In contrast, the DGEG (Directorate General for Energy and Geology, or the State Energy Department) in Portugal commenced their first auction; details are accessible via the Participa portal with applications closing at the end of July. While the twenty-day window is relatively short, the rules governing this auction were gazetted back in January.
The announcement covers both biomethane and green hydrogen, with the DGEG looking to secure 120 GWh/year for the latter. The supply contracts will be for ten years and aim to increase the renewable share in the gas grid as part of Portugal’s obligation scheme for gas suppliers (1% renewable blending obligation). The contracts will also offer security to producers, guaranteeing a minimum price level their product can receive – for biomethane this is set at 62 EUR/MWh.
It should be noted that neither Italy nor Portugal have gas GO registers in operation yet, although both schemes reference gas GOs and their potential market value.
For Italy, whether the producers can retain the GOs depends upon the tariff type awarded. Smaller plants are eligible for an ‘all-inclusive’ tariff, which is more lucrative although this involves surrendering the GOs to the GSE. In most other cases, producers will retain the GOs, although this comes with a lower awarded tariff rate. Refer to the decree for further details.
In the case of Portugal, producers who receive these tariffs are expected to surrender their GOs to the DGEG who can then put these up for resale. As such the tariff level incorporates the expected GO value. More details can be found in the specification document (in Portuguese).
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