Evolution of the role of biomethane in Italy

 Leggi in italiano

In Italy, the National Integrated Plan for Energy and Climate (PNIEC) has established an ambitious target of producing 5.7 billion cubic meters of biomethane annually by 2030. This objective presents significant challenges, considering the current production level of approximately 0.4 billion cubic meters in 2024.

As of today, Italy hosts over one hundred biomethane plants, with a combined production capacity exceeding 80,000 Smc/h, predominantly situated in Northern Italy; more than half of these facilities are powered by organic waste.

To facilitate sector advancement, numerous regulatory measures have been introduced in recent years. Notably, the Ministerial Decree DM 09/2022 prominently enabled access to 1.9 billion euros from the National Recovery and Resilience Plan (NRRP), provided through a capital contribution (up to a maximum of 40% of the investment) and an incentive tariff in the energy account for a tenure of 15 years. This decree established an incentivized quota of 257,000 Smc/h of additional production capacity (equating to over 2 billion cubic meters per year) to be allocated via competitive auctions managed by the GSE. To date, over 97% of this quota has been assigned through the initial five auctions, which facilitated incentives for 560 new projects authorized, evenly distributed between greenfield ventures and biogas plant reconversions. Geographically, the concentration of new capacity remains in Northern Italy, whereas at the feedstock level, there is a marked shift towards agricultural-based plants, constituting over 90% of the approved projects.

Taking into account the newly assigned capacities in the auctions and assuming full project completion, it is forecasted that Italy will achieve a production capacity exceeding 320,000 Smc/h in the forthcoming future.

Main challenges for the biomethane sector

In this rapidly evolving landscape, major industrial and financial entities involved in the energy transition space are enhancing their engagement in the biomethane sector. They are establishing ambitious growth objectives within their respective Strategic Guidance. These development strategies encounter a number of substantial challenges, including:

Implementation timeframes – The constraints imposed by the NRRP mandate that the projects must be operational by the end of June 2026. This deadline presents significant challenges, both in terms of the time required to complete greenfield projects (12-15 months) and the limited number of EPC contractors specialized in the construction of biomethane plants active in the Italian market. Addressing these sector challenges is crucial, and a potential extension of the hard stop stipulated by the NRRP would make the implementation of the more than five hundred authorized projects realistic.

• Market concentration – The market is currently highly fragmented. The top 20 players, in terms of prospective production capacity, hold just over 30% of the market share. A progressive consolidation of the market is anticipated, driven by potential upcoming transactions on the secondary market, particularly influenced by the need to finance project construction by current permit holders, who are predominantly small developers.
• Feedstock availability – The increasing number of plants requires securing a stable supply of feedstock through long-term contracts. This approach is essential to stabilize costs and ensure the continuous operation of the plant. This requirement may be particularly critical in certain regions of the country where there is a lower density of livestock farms, agricultural enterprises, and agri-food industries.
• Asset Management – Biomethane plants exhibit greater operational complexity compared to traditional renewable energy production plants. Effective management of these plants necessitates daily oversight of diet optimization processes, which involve the mix of organic materials used to feed the plant. The expertise of qualified Asset Managers and specialized agronomists is becoming increasingly essential, particularly for project platforms that have received investments from financial sponsors and private equity but lack the requisite technical expertise within their workforce.

Biomethane presents an appealing opportunity for investors due to the stability of revenues guaranteed by incentives for 15 years, as well as the potential for market consolidation stemming from the current fragmentation in the competitive landscape. Furthermore, significant economic impacts are anticipated through induced benefits and employment generated along the entire supply chain, which will provide tangible advantages both to the producers of biomethane and to the agricultural and industrial sectors.

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