Prospects of state support of the development of the biomethane industry in Ukraine until 2040

Abstract

The paper considers the prospects for the state support for the development of biomethane industry in Ukraine from 2025 to 2040. The main financial incentives for the use of biomass-derived energy are a special tariff for heat from sources other than natural gas, and a feed-in tariff (the auction price in the future). In the EU, biomethane production is gaining ground due to available financial incentives (premiums to the cost of natural gas, and feed-in premiums). The main obstacle to the large-scale spread of biogas (and, accordingly, biomethane) is the high cost of equipment. The amounts of state support for biogas production with its purification to biomethane and supply of the latter to the gas transmission and gas distribution networks under the conditions of biomethane production in the amounts provided by the draft Roadmap for Bioenergy Development in Ukraine until 2050 were assessed. While maintaining the price of natural gas at 2021 prices (EUR 0.24/m3), the need to subsidize biomethane production from 2025 to 2040 can reach EUR 0.263-3.5 billion, on average EUR 16.5-217 million per year. Infrastructure expenditures were not taken into account in the assessment. The possibility of electricity output from biomethane was not considered, as biogas refining to the quality of biomethane requires additional funds. The statutory auction price may be sufficient only for certain types of feedstock and for large biogas plants. The use of biomethane may be appropriate in the transport sector, as biomethane is an "advanced biofuel", and Ukraine already has a relatively extensive network of methane filling stations. Biomethane production in Ukraine will require state support, particularly in the form of direct subsidies to biomethane producers (in the form of premium to the price of natural gas), and in the form of a premium to the auction price. The use of biomethane will partially reduce dependence on imported fossil fuels, being also an important element in the decarbonization of sectors using natural gas, replacing up to 0.76 billion m3 of the latter in 2040, which is in line with the global leading decarbonization trends.