The Government’s plans to see up to 18 anaerobic digestion (AD) plants built next year are now in doubt due to further delays in the launch of its flagship support policy, the Renewable Heat Obligation (RHO).

A total of 18 AD projects secured a 20% capital grant from the Department of Agriculture earlier this year towards the cost of building a new plant.

In order to draw down the funding, the AD plants must be built and capable of producing biomethane by the end of 2025.

However, it now appears unlikely that many of the 18 projects will be built before the deadline of next December due to delays in the Department of the Environment, Climate and Communication’s (DECC) RHO support policy.

Without a long-term market for the gas, many of these projects have been unable to secure finance to start building their AD plants, meaning they won’t meet the strict December 2025 deadline.

What is the RHO?

Originally proposed in 2019, the RHO is a major policy aimed at increasing the amount of renewable energy used in the heating sector to reduce emissions.

In principle, it will be similar to the Renewable Transport Fuel Obligation, which sees renewable fuels blended with diesel and petrol. The RHO will require suppliers of fossil fuels used for heating to blend a proportion of renewables into their fuel mix or face fines.

In the case of natural gas suppliers, it is expected that they will source biomethane to meet their obligation, thus creating a market for the renewable gas.

As biomethane is three to four times more expensive than natural gas, the high cost of purchasing it will be spread across all gas users, potentially leading to price increases.

It is anticipated that the initial blending rate of 1.5% to 2% will increase to between 10% and 15% by 2030.

Delays

The RHO has faced significant delays. First proposed in 2019, the initial public consultation on the policy was held in October 2021. A second public consultation was held in August 2023, during which a high-level design was published.

Both the climate action plan 2024 and the national biomethane strategy committed to the publication of a final high-level RHO scheme by Q3 2024.

This task was assigned to DECC and SEAI, which still have not published the design. The RHO was intended to be introduced by the end of 2024, as agreed by the Government.

However, after several gaps and uncertainties were identified, further data was required to enhance the development of the RHO design process.

After a series of stakeholder meetings and workshops earlier this year, DECC confirmed to the Irish Farmers Journal that the RHO must now undergo a third public consultation.

"Feedback received has now informed a final draft RHO high-level scheme which the Department would like to open for feedback from all interested parties ahead of approval by the Government.

"Subject to ministerial approval, the Department intends to launch this final phase of public consultation for a five-week period from mid-December to mid-January," the statement reads.

The delay means the RHO may not be in place until at least the second quarter of 2025, which is much too late for most of the 18 AD projects.

Uncertainty

While little information on the latest RHO design is publicly available, there is speculation that the number of AD plants which could be supported by the policy will be smaller than our 2030 national target, especially if indigenous biomethane credits are double counted to encourage suppliers to buy Irish gas.

Furthermore, it appears that enforcement of the RHO may be delayed by one to two years, to allow the industry time to adjust to the new policy, meaning biomethane may not be purchased until 2027.

While the obligation will have to be met annually, there is no indication that purchasers of biomethane will be required to enter into long-term contracts with AD plants, meaning the plants may not be able to be financed or built.

While Ireland has seen an influx of developers in the AD sector over the past year in anticipation of the RHO policy, signals from the industry are that investment decisions will be paused, or potentially cancelled, if a functional policy isn’t put in place early next year.

Meanwhile, it is expected that Irish biomethane production and injection into the natural gas grid will decrease in 2024 from 2023, as slow policy development and implementation, challenging market conditions and lengthy grid connection timelines hinder existing plants and prevent new plants from being constructed.

At the time of writing this article, the third RHO consultation had not been published.