The European Commission has approved a €3.7bn Czechia scheme to support the construction of anaerobic digestion (AD) plants to produce biomethane.

The scheme will support new capacity in both newly-built biomethane-producing AD plants and existing biogas plants that are converted to produce biomethane.

The gas will be used in transport, heating and within industry, with the scheme approved under the clean industrial deal state aid framework.

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Structure

The Commission states that the measures are expected to benefit mostly small- and medium-sized farms, with the scheme open until 31 December 2030.

The aid will take the form of a direct price support scheme, with a two-way contract for difference that provides a bonus for each megawatt hour (MWh) of biomethane produced for a duration of 15 years, based on a so-called strike price, which will be awarded via a competitive bidding process.

If market prices of natural gas are lower than the strike price, the state will pay the producers. If they are higher, the companies will pay back the difference. The beneficiaries will be selected through a competitive tendering procedure.

This is similar in structure to Ireland’s Renewable Electricity Support Scheme (RESS).

The scheme is expected to support plants with a total output of 350 million standard cubic metres of sustainable biomethane, which contributes to the objectives of the clean industrial deal.

Contrast

The Commission concluded that the Czechia scheme is necessary, appropriate and proportionate to accelerate the transition towards a net-zero economy and facilitate the development of certain economic activities, which are important for the implementation of the clean industrial deal.

The approval comes as a stark contrast to the Irish Government’s attempts to develop an AD industry. Earlier this month, the main support mechanism for AD - a proposed multiplier for Irish biomethane within a new Renewable Heat Obligation Scheme - was found not to be compliant with EU market rules by the European Commission.

The AD industry has long lobbied for a contract for difference-style support schemes, such as that introduced and approved in the Czechia.

However, despite recommendations from its consultants KPMG to introduce a subsidy scheme, both the Department of Agriculture and the Department of Energy did not believe it would be affordable.

Instead, in 2023, they opted to develop a Renewable Heat Obligation Scheme, which would shift the additional cost of green gas on to consumers.

The key element of this scheme, the multiplier, was intended to make Irish biomethane competitive with imported biomethane, but was found not to be complaint with EU market rules by the European Commission’s detailed opinion.

Last week, the Department of Climate, Energy and the Environment confirmed at the SEAI Energy Show that the obligation scheme, as well as a grant scheme, will be introduced without the multiplier, with no plans to look at another form of support.

This will likely result in a high share of European biomethane being imported into the country to meet the obligation.