Extend contracts for renewable natural gas early and gain financially

Kassel. The future of cogeneration units operated with renewable natural gas hangs in the balance owing to the significantly reduced feed-in tariffs in last year’s amendment to the Renewable Energies Act (EEG), and new projects are no longer worthwhile. Andreas Zimmermann, Head of Sales Support Renewable Energies at WINGAS, explains what operators need to be aware of. 

Mr Zimmermann, how has the adjustment of the EEG changed the market situation for renewable natural gas?
This form of energy has lost a great deal of its appeal as a result of the amended EEG, which entered into force on 1 August 2014, because the remuneration for renewable natural gas in electricity generation has been reduced by around 50 percent compared to the old 2012 version of the EEG. In particular, market players have criticised the reduction of the input material remuneration categories, including for energy crops, as well as the axing of the gas processing bonus for feeding gas into the grid.

What are the effects of this?
The German federal government is curbing the development of biomethane as a form of energy with these changes, and is impeding further momentum for climate protection. It is likely to become more difficult for some operators of renewable natural gas cogeneration units to operate their plants profitably. Moreover, the implementation and refinancing of additional biogas feed-in projects will probably be economically unattractive.

Who is most affected by these changes?
Many municipal utilities in particular take advantage of renewable natural gas in their local and district heating grids. They mostly use it in cogeneration units with gas engines. The electricity that is generated at the same time as the heat is fed into the electricity grid at the remuneration rates specified by the EEG. This not only reduces CO2 emissions efficiently and ecologically, it also secures financial advantages.

Is the market for renewable natural gas still attractive at all?
Generally speaking, it is not possible to predict whether there will still be a liquid market for renewable natural gas, as we now know it, in two or three years time. The fact that the prices for biomethane, which were at a relatively stable level before the 2014 EEG entered into force, have increased since 1 August 2014 despite falling demand show that the prospects are rather poor. Short-term deliveries in particular are more difficult to find on the market at the moment.

What should municipal utilities and private-sector renewable natural gas cogeneration plant operators do now?
In contrast to natural gas,renewable natural gas is only available in limited quantities, because it has to be specially generated. Hence, cogeneration unit operators should act now and check the possibility of extending their purchasing agreements early in order to secure – depending on when the agreement began – financial support based on the old EEGs from 2012, 2009 and 2004 long-term. This is because the financial support applies to the year the plant was commissioned and the following 20 years – i.e. up until 2035 at the latest. Overall, for renewable natural gas cogeneration plant operators it will be important to obtain renewable natural gas on the market at good conditions long-term.

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