As companies accelerate their decarbonization efforts, securing a long-term biomethane supply is becoming more critical than ever. With forecasts indicating potential supply shortages and regulatory changes pushing for cleaner energy, biomethane stands out as a vital solution for organizations striving to meet ambitious sustainability targets.
Why Biomethane is Critical for the Energy Transition
Biomethane, a renewable alternative to natural gas, plays a crucial role in the global push for decarbonization. Unlike fossil-based natural gas, it is produced from organic waste such as agricultural residues, making it both sustainable and scalable. Key sectors like maritime, chemicals, and steel are increasingly turning to this renewable natural gas (RNG) as a cornerstone of their renewable energy strategies.
- Versatile and Efficient: Chemically identical to natural gas, biomethane can be used in existing infrastructure with no adjustments needed, offering companies a fast and cost-effective way to reduce emissions.
- Regulatory Compliance: With stricter regulations like the EU ETS, biomethane provides a certified pathway for companies to meet Scope 1 emissions targets and reduce their carbon footprint.
Growing Demand vs. Limited Supply
The demand for biomethane is rising rapidly as more industries commit to decarbonization. However, supply is struggling to keep up, creating an urgent need for businesses to secure contracts now.
- Supply tightness expected to mount from 2025: RED III sets very ambitious decarbonization targets for a range of hard-to-abate sectors including industrial energy, heating and cooling, and transport. Biomethane is a cost-competitive product that not only helps decarbonize all these sectors, but also will be required at scale to achieve the RED III goals. Meanwhile, deployment of new capacity is behind the pace needed to hit the RepowerEU 2030 target. RED III's implementation is due in May 2025 across EU Member States, with targets being transposed into national law.
- Sector-Specific Growth: Historically, retail heating, industrial heating and haulage have driven demand for biomethane in Europe, supported by regulatory mandates and corporate decarbonization commitments. New energy-intensive sectors are entering the mix, including chemicals, steel, cement, and maritime.
This supply-demand imbalance presents a critical window for companies to lock in long-term contracts before prices rise.
Biomethane Applications: Meeting Sector Needs
- Hard-to-Abate Sectors: RNG offers a viable solution for industries such as maritime, chemicals, steel, and heavy-duty transport, which face significant challenges in reducing Scope 1 emissions. These sectors are increasingly pressured to meet stringent regulatory standards under frameworks like the EU ETS and RED.
- Seamless Infrastructure Integration: A major advantage of biomethane is its compatibility with existing natural gas infrastructure, meaning companies can transition to renewable energy without investing in new technology.
- Scope 1 Decarbonization: By reducing on-site emissions, RNG helps companies achieve net-zero goals, making it an essential tool for decarbonization.
Certified vs. Uncertified Biomethane: What You Need to Know
As the biomethane market matures, the distinction between certified and uncertified volumes has become increasingly important.
- Certified: Certified volumes come with a Proof of Sustainability (PoS), which tracks the lifecycle of biomethane from feedstock to end-use. Certified biomethane ensures full traceability, lower carbon intensity, and compliance with regulations like the EU ETS.
- Uncertified: Uncertified biomethane certificates are typically cheaper because they lack the traceability required for EU compliance markets such as the ETS. However, for voluntary reporting purposes, uncertified biomethane certificates are a perfectly valid choice. Many corporates opt for uncertified biomethane certificates to decarbonize their scope one natural gas consumption rather than simply offsetting their emissions using voluntary emission reductions. This way corporates can demonstrate true decarbonization of their own activities.
Subsidized vs. Unsubsidized Biomethane: Understanding the Difference
Governments often offer subsidy schemes to promote biomethane production, but it’s essential to understand how these impact market applications:
- Subsidized: While cheaper, subsidized volumes may have limited applications, particularly in road transport markets that do not accept biofuels products which have already received production support..
- Unsubsidized: These volumes are typically required in higher-paying compliance markets, such as the transport sector. New applications such as grid blending schemes are likely to also required unsubsidized production.
Why Invest in Biomethane Now?
There’s no better time to secure biomethane supply for your business. Recent developments, including regulatory changes and evolving market dynamics, have created a brief period of oversupply, putting downward pressure on prices.
- Oversupply and Price Trends: Currently RNG markets are oversupplied, which has pushed prices down to long-term lows. However, this has slowed investments in new projects, which will delay the ramp up of production. Meanwhile, RED III targets will create new demand pools that are due to come online as soon as 2025, which will lead to a shift in the market balance and should cause a structurally tight market until at least 2030, causing prices to rise.
- Regulatory Changes: New regulations, including the implementation of RED III in 2026, the inclusion of the maritime sector in the EU ETS, and the launch of the Fuel EU Maritime biofuels blending mandate will increase demand for RNG across Europe.
- Secure Long-Term Supply: By partnering with STX Group, companies can lock in long-term biomethane contracts at current lower prices, ensuring price stability and securing a reliable supply for their decarbonization strategies.
Case Study
Biomethane plays a crucial role in SKW Piesteritz’s efforts to decarbonize ammonia production, offering a sustainable and scalable alternative to fossil-based natural gas. By integrating RNG into their operations, SKW Piesteritz reduced scope 1 emissions while meeting ambitious sustainability targets. As regulatory demands tighten, securing a reliable biomethane supply is becoming critical for maintaining compliance and cost efficiency. Discover more about SKW Piesteritz’s journey towards sustainable ammonia production—download the full case study here.
Call to Action
Explore how biomethane can help your company achieve decarbonization goals, especially in hard-to-abate sectors. Secure your biomethane supply and stay ahead of regulatory changes. Lock in long-term contracts to protect your business from future price increases and ensure compliance with sustainability goals.