The State’s plan to develop an agriculture-based anaerobic digestion (AD) industry is in turmoil after the EU said no to its flagship renewable heat scheme, threatening an exodus of developers from the country.

Since setting its first biomethane target in Ireland in 2021, the Government has struggled to establish a clear means of supporting the construction of AD plants needed to meet that target. Despite increasing the target by 200% in 2023, it still failed to put in place a clear, accessible, and bankable support scheme similar to those operating across Europe.

Instead of a Government-backed 15-year contract for difference scheme (as used for wind and solar), it proposed a renewable heat obligation (RHO) scheme requiring fossil fuel suppliers for heating to source part of their energy from renewables. For natural gas suppliers, this effectively means biomethane, creating a new market for AD plants.

Multiplier

A key feature of the proposed RHO scheme was a “multiplier” applied to domestically produced biomethane.

Under the State’s plan, one unit of Irish-produced biomethane would count as 1.5 units towards suppliers’ obligations, aiming to give domestic production an advantage over imports. Fuel suppliers would be expected to contract with Irish AD plants, alongside a planned capital grant scheme still under development.

Despite strong criticism from industry of its risk and complexity, particularly farmers, who warned smaller plants would be excluded, the policy still attracted hundreds of millions in investment, with some large-scale projects already under construction.

However, progress has stalled. The European Commission opinion found the proposed “multiplier” incompatible with EU internal market rules, delaying legislation by six months while a solution is sought.

Since last week, the

Concerns

Based on the decision paper, the Commission had a number of key concerns, some which stemmed from a lack information submitted by the state. Key concerns included:

Discrimination: The Commission’s main concern is that the scheme favours domestic biomethane by applying a “multiplier,” making imports less attractive. This discourages trade and likely breaches the EU principle of free movement of goods under Article 34 TFEU.

Weak justification: Ireland argued the scheme supports environmental and energy goals, but the Commission outlines that it fails to take into account the overall EU renewable energy objectives, and not just domestic production. It also stresses that economic reasons cannot justify restricting trade.

Lack of evidence: The Commission argued that Ireland did not show that the multiplier will increase renewable energy use or domestic production.

Disproportionality: The measure goes beyond what is necessary. The Commission explains that the objective could be achieved through less trade-restrictive means, including allowing imports to contribute equally, and criticises the lack of clarity around the supposedly temporary nature of the multiplier.

Alternatives not considered: The Commission outlined that Ireland failed to explore other support mechanisms that would not distort trade, weakening the legality of the measure.

What do the Government say?

Commenting to the Irish Framers Journal, a spokesperson at the Department of Climate, Energy and the Environment said it is now reviewing this opinion to determine next steps, and the Government remains fully committed to supporting the development of an indigenous biomethane sector.

“Introduction of the RHO is a priority for the Department. Drafting of the necessary legislation to underpin the scheme is underway with the intention to submit to Government for approval to publish as part of the summer legislative session,” the statement read.

It also reaffirmed its plan to proceed with the new capital grant scheme.

“The second Biomethane Capital Grant scheme, delivered by the Department of Climate, Energy and the Environment, will proceed as planned.

“Funding of up to €200 million, secured through the NDP (National Development Plan)/ICNF (Infrastructure, Nature and Climate Fund) will be made available to support the development of anaerobic digestion plants in Ireland,” it states..

The Department intends to introduce this scheme in quarter three of 2026.

What can they do?

The Government has six months to respond to the Commission’s concerns. However, as it currently stands, it appears unlikely that it will successfully convince the Commission of the necessity of the multiplier. The State may instead consider alternative support mechanisms while proceeding with the implementation of the RHO without the multiplier, such as enhanced capital grants or subsidy schemes.

However, given the pace of policy development in the AD sector, it is unlikely that such measures will be in place by 2026 or 2027.

The author is currently involved in a family/community proposal for an anaerobic digestion facility in Co Donegal.

In statements to the Irish Farmers Journal, the industry has responded strongly to the news, which appears to have taken them off guard.

RGFI

The Renewable Gas Forum Ireland (RGFI) said the RHO is still the main way to deliver Ireland’s biomethane sector, even if it now has to go ahead without the multiplier.

Interim CEO Nick Bennett said: “Ireland must now move quickly to implement the RHO and as seems necessary following the Commission’s opinion, without the Multiplier.” The group stressed the need to keep momentum, especially as a number of projects are already in development.

“It supports a two-step approach, rolling out the RHO while putting other supports in place to make projects financially viable. RGFI also pointed to the importance of growing Ireland’s own energy supply and welcomed the Commission’s openness to alternative solutions.

IrBEA

The Irish Bioenergy Association (IrBEA) reacted more strongly, saying its members are worried about what this means for the sector. CEO Seán Finan said: “IrBEA members are frustrated, disappointed and worried for the development of the Irish biomethane sector” and added that “2026 will be a make-or-break year for the Irish biomethane sector”. The group is concerned that without the multiplier, many projects may not go ahead. It is calling for the RHO to move forward anyway, along with new supports and a clear signal from Government that it still backs the sector.

Cré

The Composting & Anaerobic Digestion Association of Ireland (Cré) took a more measured response. CEO Tony Breton said: “This latest knock back is disappointing but given the EU’s trade rules it was almost predictable.”

The organisation called on the Government to proceed with the RHO as a matter of urgency and to consider alternative mechanisms to support domestic biomethane production and strengthen energy independence.

Liquid Gas Ireland

Liquid Gas Ireland said the Commission’s opinion has created uncertainty and could delay investment at a key point for the sector. It called for greater clarity from Government on the direction of policy, saying businesses, farmers and energy users need certainty to plan and invest.

It also stressed the importance of a stable, “technology neutral framework” that supports different renewable heat options while keeping costs affordable.