They say that truth is often stranger than fiction. Every now and again, that rings especially true in the world of policy, and what has unfolded over the past three weeks in energy policy is a case in point.

The Government’s flagship scheme, designed to support the development of domestic biomethane supply and in doing so, improve energy security, provide opportunities for farmers to diversify and reduce emissions, and create a new AD industry, now looks set to achieve the exact opposite.

A key element of the Renewable Heat Obligation (RHO), the multiplier for Irish biomethane, has been deemed non-compliant with EU rules. Without this support mechanism, the scheme, due to launch this year, is likely to render biomethane production unviable in Ireland.

At the same time, it would legally oblige gas suppliers to incorporate renewables into their mix, meaning they will likely source cheaper biomethane from abroad.

In practice, that likely means importing biomethane from elsewhere in Europe, where much of the available supply has been produced by farmers and developers with the help of state subsidies.

The RHO could yet become one of the most striking failures of energy policy in recent times, and if reports are accurate, the government was warned multiple times by the European Commission that this policy would work.

No plan B

The aim of the RHO scheme was to create a long-term market for biomethane gas, allowing new AD plants to be bankable and built. The scheme would legally require suppliers of fuel to the heat sector to blend renewables into their fuel mix, eventually reaching a mix of 10%. While many fuels are eligible, in practice gas suppliers’ only option is biomethane.

The higher cost of biomethane compared to natural gas would be spread across all gas consumers or paid as a premium by individual consumers. If suppliers do not meet the obligation, they would be fined.

As Ireland is part of the common market, suppliers will likely meet their obligations by importing European biomethane certificates, which are typically cheaper and often originate from plants that previously received state subsidies. To ensure Irish biomethane remains competitive, a multiplier was introduced so that Irish biomethane counts as 1.5 certificates compared to one certificate for imported.

However, after last month’s Detailed Opinion from the European Commission that this multiplier does not comply with EU rules, the Department of Climate, Energy and the Environment (DCEE) has confirmed it will remove the measure and proceed with the RHO regardless this year.

Speaking at the recent SEAI Energy Show, DCEE’s Sean Kinsella said the department will continue to review the multiplier alongside the RHO implementation and may update it later if needed. He said that the Commission suggested there could be less restrictive options and said the department plans to engage further to explore these. He said they are continuing to learn from how other countries support biomethane, but for now the focus remains on the RHO and a new grant scheme, with no plans to introduce a feed in tariff.

Changes to grant scheme

Alongside the RHO, a new €200 million capital grant scheme will be introduced, although it has yet to be designed and consultants have not yet been appointed.

Kinsella said that, following the removal of the RHO multiplier, they may consider varying levels of grant aid depending on the size of AD plants. This is expected in the third quarter.

What does this mean

It can be difficult to fully understand the implications of this, and the industry is still coming to terms with it. There will still be an AD industry in Ireland. Companies such as Stream Bioenergy, Carbon AMS and Nephin Renewable Gas are expected to continue building plants, supported by bespoke gas purchase agreements with fuel suppliers and customers. However, this relies on convincing suppliers to pay significantly more for Irish biomethane, which is challenging given economic headwinds.

As a result, the Climate Action Plan target of 5.7 TWh of biomethane gas production, requiring around 150 to 200 AD plants, is now unrealistic unless drastic changes are made. “That will support some level of biomethane production or development in Ireland, but obviously not to the level that we’re looking for” Kinsella said. Aside from a limited number of projects, most biomethane demand is likely to be met through imports.

This undermines the Government’s very own National Biomethane Strategy, which aimed to develop a domestic AD industry to boost energy security, diversify farm incomes and reduce emissions beyond the energy sector.

Consumers will still pay for biomethane through higher fuel bills, but much of that spending may go to European producers rather than supporting Irish farmers and developers.

This comes as the European Commission recently approved a €3.7 billion Czech scheme providing direct price supports for biomethane production, expected to benefit mainly small and medium sized farms. A similar approach has consistently been ruled out in Ireland, which instead opted for an obligation-based scheme that isn’t capable of achieving its aims.

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