Europe is currently in the middle of a ramp-up of biomethane production capacity. With great ambitions for larger shares of biomethane in Europe, many countries have improved incentives and seen a clear uptick in investment activity.
The activity data for 2024 is not available yet, but the European Biogas Association (EBA) released its yearly report last autumn, showing that in 2023 biomethane production increased by approximately 20 % year on year, to 4.9 bcm across the EU.
The increased production comes on the back of a healthy rate of deployment in the market. Installed plant capacity by the end of 2023 was up 40 % year –on year, to 6.4 bcm/year. France and Italy have been responsible for much of the recent increases in plant number and production volume due to generous production support schemes.
The large capacity increase for 2023 suggests that we can expect production for 2024 to exceed 6 bcm. However, given the REPowerEU target of 35 bcm by 2030, increases need to accelerate over the next five years.
The cost of producing biomethane is higher than that of fossil natural gas. In Europe, we have two market models that allow producers to be compensated for this additional cost.
While there are two broad categories, European biomethane markets are even more fragmented, with premiums and discounts depending on characteristics including country of production, feedstock type, sustainability certification, export eligibility and carbon intensity.
Below we show the price movements through 2024 of biomethane certificates, both with and without production support. The prices shown represent premiums over natural gas (that is, for the green attributes only). The dotted lines represent unsubsidised products, while the solid lines are for subsidised products.
While price trajectories depended upon the biomethane characteristics, overall biomethane prices finished the year down across all markets.
Biomethane GO prices fell in 2024 after record highs mid-2023, associated with the energy crisis. The voluntary market GOs dropped between 40-50 % over the course of the whole 2024 year.
The drop at the beginning of 2024 continued a trend which started in H2 2023 when prices plummeted from the historic highs of close to EUR 50/MWh for unsubsidised DK biomethane GOs observed in H1 2023. As prices fell, the market saw a lull in activity, with some recovery in H2 2024.
Mid-year, prices stabilised at levels observed before the energy crisis (pre-2022). The price stabilisation was associated with a switch in the active vintage traded, where the 2024 vintage started picking up steam. However, it was unclear where the upward pressure was going to come from.
In particular, the validity of biomethane GOs to reduce Scope 1 and Scope 2 emissions is still awaiting a ruling, which is likely to be delayed to 2026. GO prices tend to trend with gas prices, which were projected to increase in Q4 2024, although a milder-than-expected winter dampened this outlook, thus keeping price movements subdued since then.
The concept of GO auctions is based on two premises:
The State (or representatives) are issued the GOs (as opposed to the producers), which they then sell on the market via an auction mechanism to recover some of the costs of the support schemes. As a corollary, the support level is often linked to the GO market value.
Note, these GO auctions are distinct from capacity auctions, which are often used as a method of offering investment support for biomethane facilities.
2024 was the year when auctions for subsidised GOs commenced, with the GSE holding the first auction in June, and follow-up auctions in September and December. The median prices have been around the EUR 1/MWh mark, a fraction of the prices observed in UK, DK or NL biomethane markets. This reflects the characteristics of the Italian auction GOs (transport incentivised, non-exportable), severely limiting the use case and demand (Only 21% of December auction volumes sold). See our subscriber market page for more data.
EEX also conducted the first French biomethane GO auction in December 2024 with 80 GWh on offer (fully subscribed) and an average settlement price of EUR 9.5/MWh, with some variation depending upon plant certification and eligibility for ETS obligation reductions. The price levels were similar to the other established markets.
The EEX and GSE will continue to hold regular auctions in 2025. The UK will likely join France and Italy in auctioning biomethane GOs, with e-Power announcing via X.
It should be noted that e-Power, unlike EEX and GSE, are not the authorised issuing body in the UK, and the GO sellers are not the State, acting to recoup subsidy costs. Nevertheless, the volumes offered on the e-Power auction are likely to be subsidised.
As mentioned, without production support for cashflows, unsubsidised operations rely on higher sales prices. Voluntary market prices usually do not suffice, so unsubsidised markets rely on value being set by compliance or obligation mechanisms.
The typical examples are the transport fuel markets, where countries state yearly targets for the blend/share of renewable fuels in the total fuels. Obligations are placed on large fuel suppliers who must source the appropriate amount of renewable fuel (of which biomethane is an option) else face a financial penalty for non-compliance.
The desired quality of the biomethane for compliance markets is higher than that for voluntary or disclosure markets; in addition to being non-subsidised, the use of crop, or non- (RED II) Annex IX, feedstocks is restricted and biomethane volumes usually require sustainability certification labels.
However, transport schemes often offer incentives for the right mix of characteristics – for example, biomethane from Annex-IX part A feedstocks are often eligible for “double counting” which doubles the value per energy unit for an eligible biomethane compared to a non-incentivised fuel.
The German scheme encouraging biofuel uptake (THG-quote) performs valuation based on emissions savings compared to a standard diesel fuel. This leads to higher prices for biomethane from manure which has negative carbon intensity associated with avoided fugitive methane emissions.
Prices in 2024, for manure biomethane (green premium only) ranged from EUR 60-140/MWh, the higher prices were associated with THG usage at the beginning of the year.
While prices fell overall in the year for biomethane in transport markets, they were spared the more drastic fates of their voluntary market peers. Increasing blending mandates are likely to continue to place upward pressure on prices here.
However, cheap biofuel imports (effectively a substitute for biomethane in renewable fuel obligation schemes) continued to place downward pressure on pricing, even though a clampdown on allegedly fraudulent claims and dumping took hold throughout the year.
Prices are likely to increase in 2025, as the previous measures to reduce the distortionary effect of biofuel imports come into full effect. Furthermore, in the German THG market, the authorities are preventing the carryover of certificates from 2024 to 2025, which should see a bump in 2025 pricing.
While physical separation and delivery of biomethane to end-users ensures consumers they are receiving a green product, it is often costly and does not take advantage of extensive (fossil) gas network infrastructure. It is possible to permit mixing in common infrastructure while still assigning the green attributes to producers and end consumers using tracking systems, allowing biomethane markets to function.
EUs Renewable Energy Directive (RED) subscribes two tracking methods relevant for biomethane, namely in:
Both saw significant developments in 2024.
Member states continue to work towards RED compliance by implementing renewable gas GO registers. The AIB accepted eight new members in 2024 – signifying that these bodies had established the GO framework and registers, and were working towards (or had achieved) connection to the AIB hub which will allow cross-border GO transactions to other AIB members.
The ERGaR CoO scheme, while only seeing one new member in 2024 (Energinet), continues to be the dominant certificate transaction hub in Europe.
The Union Database was open for registrations on 15 January 2024, and officially online on 21 November 2024. This was not without issues, including ambiguity in the linkage between the UDB and GO registers which could cause credibility issues if not resolved.
While the UDB is online, member states have until 21 May 2025 to ensure Economic Operators are compliant with UDB operation (Article 31a). As a result, we expect transaction activity in the UDB to be delayed until H2 2025.
Much work still needs to be done to ensure compliance with RED provisions for renewable gases, and to encourage a biomethane market across Europe which will foster both supply and demand.
Bio-Liquified natural gas (or bio-LNG) is liquefied biomethane, a drop-in replacement for its fossil LNG counterpart. The characteristics of biomethane facilities (small scale, and often distant from gas network infrastructure) often means that liquefaction has a key role in transporting volumes from producers to consumers.
Technology exists for liquefaction units for biomethane plants. Alternatively, biomethane facilities injecting into the grid can deliver to an established (fossil NG) liquefaction terminal and claim a bio-LNG product, provided there is proper mass-balancing, and certification of involved facilities.
While bio-LNG is by no means a new concept, production continues to grow and 2024 marked a year where several bunkering deals were announced, spurred on by the penalties to be ushered in by both FuelEU Maritime and Maritime EU ETS, with bioLNG counting for both renewable share and reduced emissions respectively.
Titan Clean Fuels and Gasum announced several developments throughout 2024, with the former facilitating the largest ship-to-ship delivery of bioLNG in April. The latter is based in Finland, with operations all over the Nordics, where liquefaction is expected to be the main mode of transport for biomethane.
According to the recently released EBA statistical report 2024, 2023 saw an additional 6.5 TWh/year of bio-LNG capacity installed, and 2024 should have seen similar increases to 15.1 TWh/year total capacity.
We expect 2025 to be bullish for bio-LNG, particularly given the related obligations in the maritime sector. An outsized contribution from Nordic countries is also foreseen, which have shown to be amenable to offering government support, and with feedstocks located in remote gas regions, where liquefaction is more viable than network injection.
E-methane is methane/natural gas created from green hydrogen, reacted with biogenic CO2. E-methane is chemically indistinguishable from fossil methane, but like biomethane, has a low carbon footprint.
From CMA CGM
By converting green hydrogen to e-methane, existing gas pipeline infrastructure can be taken advantage of. The biogenic CO2 stream resulting from the upgrading of biogas to biomethane also can serve as a feedstock to e-methane.
While e-methane is neither a new concept, nor commercially available, there was significant chatter regarding the low-emissions fuel in 2024. In April, Energinet in Denmark revised their domain protocol to allow for the issuance of e-methane GOs.
In September, the European Biogas Association developed a map of e-methane facilities in Europe, including the split of technologies, CO2 sourcing strategies and other plant characteristics. Of the 55 plants documented by the EBA, thirty-four source their CO2 from biogas upgrading operations.
Outside of Europe, Japan is also leaning heavily into e-methane to transition to a low-carbon economy, which Nikkei reported on in December; Osaka Gas is looking to incorporate e-methane in their US based LNG supply chains, although these operations will use captured fossil fuel emissions, rather than biogenic CO2.
For 2025 e-methane will continue to make headlines, although these developments will target a 2030 timeline. Proof-of-concept studies should be carried out, and we would expect the IEA to assess the technology readiness level (TRL) of e-methane via their clean energy technology guide.
Summary and outlook
The European biomethane market has been growing, with more than 6 bcm production expected for 2024 once the figures are finalised. The countries seeing the largest gains are France and Italy, due to the availability of production support.
Decreases in the voluntary market prices (GOs) continued a trend observed since late-2023, with values falling back to pre-energy crisis levels (2021, early 2022). Biomethane in compliance markets (namely transport) also saw a drop in value, due to competition from cheap biofuel imports.
For 2025, we are bearish on the European GO market prices, with a flat or slightly bullish outlook for compliance biomethane. We expect the high rates of growth (20% per year) to carry through to 2025.
2024 also saw the first biomethane GO auctions take place; although French auctions were completely subscribed with GO values close to EUR 10/MWh, Italian GOs were oversupplied, with only niche applications. With more auctions likely to take place in 2025, interest could grow.
In 2024, the AIB cross-border scheme added eight members, and the the long-awaited UDB launched, covering biomethane for national targets (compliance usage). However, the overall membership numbers for the AIB scheme are still low, and the interaction of the UDB and GOs is still not clear. Improvements in both these cases are needed to facilitate European biomethane markets. Further clarification on the UDB is expected in 2025, and the first statistics will be made available in 2026, if not late-2025. Similarly, we could see AIB gas scheme memberships grow further in 2025, enabling meaningful transfers between countries via the AIB hub.
BioLNG is expected to grow rapidly, with bunkering arrangements and biomethane plants with liquefaction capability being established at high rates. E-methane will grow in profile, with more verification and pilot plants being established, although its fortunes are tied with green hydrogen.
Veyt specialises in data, analysis, and insights for all significant low-carbon markets and renewable energy.
