Investors are considering European biomethane as a potential asset due to its growing significance in the renewable energy sector.
The European Union is gearing up for a significant shift in its energy landscape, with a focus on increasing biomethane production as part of the REPowerEU Plan. The goal is to produce 35 billion cubic metres of biomethane per year by 2030, a substantial jump from the current 6.4 billion cubic metres.
This ambitious target has sparked a wave of investment in biomethane, with Goldman Sachs Asset Management establishing Verdalia Bioenergy, a business dedicated to developing, acquiring, building, and operating biomethane plants across Europe. The EU's strong targets and policy support for biomethane reflect the bloc's commitment to clean energy and energy security.
Biomethane, billed as a sustainable, carbon-low alternative to fossil gas, accounts for the vast majority of biogas investments. The European Biogas Association predicts €25 billion in private investments for European biomethane by 2030, a 30% increase from last year's estimates.
Investors are drawn to biomethane due to its advantageous use of existing natural gas infrastructure and its potential to contribute to carbon negative practices. Matteo Botto Poala, the managing director of an investment giant, considers biomethane 'one of the most compelling segments in the energy transition for infrastructure investors'.
The Dutch pension giant ABP, for instance, invested €250 million into bioenergy infrastructure firm BioticNRG via its asset manager APG. Similarly, several of the largest Danish pension funds have acquired a majority share of Sindal Biogas, a biogas plant in North Jutland.
The interest in biomethane opportunities is not limited to traditional investors. Funds focused on energy transition and biodiversity, such as the ABP Netherlands Energy Transition and Biodiversity fund (ANEB), are also showing increased interest. ANEB recently bought Methaplanet, a company that turns horse manure into energy pellets to boost biomethane production in anaerobic digesters.
The acceleration of biomethane investment is not just a matter of economic interest but also a geopolitical concern. The EU's aim to reduce its reliance on Russian gas has made technologies helping in this regard welcome, according to Martijn Olthof, portfolio manager at ANEB.
This is reflected in investments like the one made by MAPFRE, a prominent insurance company, which launched Europe's first dedicated biomethane fund last year, aiming to raise €100 million for 20-25 biomethane plants in Spain over five years.
The expansion of biomethane production is not without challenges. Europe currently has 1,322 biomethane plants, but it'll need another 950 plants to hit the 2030 target, according to EBA estimates. This growth is necessary to meet the EU's ambitious goals, as biomethane offers a promising solution to mitigate climate change, reduce waste, and provide renewable energy solutions.
Infrastructure managers like White Summit Capital and the Axpo Group are also committing to biomethane, with plans to build new plants in Portugal and Italy respectively. The Axpo Group, for example, plans to start construction in early 2025 on facilities in Sicily that will each produce around 45 GWh of renewable energy annually, reflecting its commitment to biomethane after entering the Italian market in September 2024.
Biljana Kulisic, a European Commission bioenergy expert, expressed hope for accelerating biomethane investment, recognising its potential to contribute significantly to the EU's energy transition and energy security. With the growing investment in biomethane, Europe is well on its way to a cleaner and more secure energy future.
