The role of biomethane in replacing fossil gas is recognised in EU legal frameworks governing the internal market in gas, energy transition, and the clean industrial strategy. “Renewable gas” includes biogas that has been upgraded to biomethane, and it is a key pillar in the EU’s climate-neutrality strategy.

In Ireland, a Biomethane Strategy focuses on leveraging the production potential of the agricultural sector and stimulating demand. In its 2022 Biomethane Energy Report, Gas Networks Ireland (“GNI”) predicted that meeting the domestic production target would require up to 150 new median sized biomethane production units, but that a smaller number of larger plants may emerge as the market develops. While biomethane is a direct substitute for natural gas and is already injected to the grid, GNI’s pathway to a net zero carbon network foresees that, by 2040, we may also have an independent biomethane network. 

Permit-granting procedure

To accelerate the roll-out of renewable energy development, the EU requires faster, streamlined permit-granting procedures (under the Renewable Energy Directive (“RED”)). This covers all relevant administrative permits to build and operate renewable energy plants, as well as assets necessary for their connection to the grid. Time begins with acknowledgment of the completeness of an application and runs to notification of a final decision.

Biomethane production facilities are treated as renewable energy projects and so required to be permitted within a period of two years (or one year in renewables acceleration areas). Renewable energy projects are presumed to be in the overriding public interest which can help expedite assessments under EU environmental legislation and strengthen the legal position of projects when weighed against other public or private interests.

We look in greater detail at recent transposition of these requirements as regards planning permission (in the current planning regime) in our briefing: Renewable Energy: update on permit-granting procedures in Ireland.

Planning permission, environmental consents and waste authorisations

A biomethane production facility will require planning permission from the local authority. The Biomethane Strategy indicates that guidelines are being developed for local authorities to assess applications for anaerobic digestion and biorefinery facilities. Developers should expect local authorities to consider factors such as site suitability, traffic, odour, visual impact, and proximity to sensitive receptors.

Depending on the scale and feedstock, a production facility may also require:

• an Industrial Emissions Licence issued by the Environmental Protection Agency (“EPA”) if it processes waste feedstock or exceeds certain thresholds;
• an Integrated Pollution Control Licence issued by the EPA, if the facility is a non-waste plant with significant emissions or environmental impact;
• a Water Discharge Licence issued by the local authority or Uisce Éireann, if the facility is discharging treated effluent to watercourses or sewers; and
• a Waste Collection Permit and End-of Waste certification for digestate reuse, if using or producing waste-derived digestate, and Animal-By-Products Approval issued by the Department of Agriculture, Food and Marine, if using manure, slaughterhouse waste or other animal by-products.

Grid connection / transport

Biomethane producers will seek direct connection to the gas grid or else transport gas to a central grid injection (“CGI”) point, a refuelling station, or directly to a customer. Alternatively, consumption may be onsite, particularly in industrial settings.

For those seeking grid connection, a connection agreement with the system operator, GNI, is required. Renewable gas connections are addressed in this Connections Policy Document. Depending on the nature of the connection, GNI may also be required to obtain a consent from the Commission for Regulation of Utilities (“CRU”) under section 39A of the Gas Act 1976 for construction of a gas pipeline. Connection and use of system is regulated by law.

The gas sector is regulated under the EU’s Fourth Gas Package, which we looked at here: EU provides Legal Framework for regulation and decarbonisation of the Gas Sector. In addition to entitlements governing connection to and use of the natural gas system, the Fourth Gas Package includes new provisions to encourage integration of renewable gas in the system.

These provisions include an obligation to provide an enabling regulatory framework for biomethane production facilities in relation to connection fees and costs. Transparent and efficient procedures for non-discriminatory connection for renewable gas production facilities in line with capacities in the Network Development Plan must be published. Member States may grant production facilities for biomethane priority to connect.

There is also a discount to tariffs for renewable gas applied to entry points from production facilities, with discount levels to be reviewed every five years. There are obligations relating to firm capacity for renewable gas, to be implemented through requirements around reverse flow from the distribution to transmission system (or alternatives like smart grid solutions or direct connection to the transmission system).

Where biomethane is grid-injected, GNI has a role in providing evidence related to green credentials, by issuing proofs of origin for mass balancing of injected and withdrawn renewable gas. It checks that injection and withdrawal have taken place by the claiming parties and assigns the production volume to the withdrawn volume. A cancellation statement then allows certain green certificates to be obtained (see further below under “Incentives / Green Credentials”).

Where biomethane is grid-injected, there are also responsibilities around use of the system. A licenced Shipper will accede to the GNI Code of Operations. The biomethane producer can become a Shipper itself or else contract with the Shipper (which is often the offtaker or another third party). The Shipper will book capacity at entry and exit point(s). Daily nominations of the gas to be injected must be made to GNI and there are significant penalties if volumes injected exceed capacity purchased. There are also penalties if volumes injected are not matched by customer offtake from the system. It is important that the commercial arrangements between the producer and offtaker make clear their respective obligations and liabilities around nominations and balancing. Commercial arrangements will also need to be clear on procedures and liabilities between the parties if biomethane to be injected does not meet GNI specifications (see further below under “Route to Market”).

Construction

Construction contracts for biomethane projects can be structured in a variety of ways depending on the project’s complexity, risk allocation, and developer preferences.

A common approach is an EPC / turnkey procurement, whereby a single contractor assumes responsibility for delivering the fully operational facility, offering a streamlined process and clear accountability.

Alternatively, a split procurement model may be adopted, where separate contracts are awarded for civil works and for the supply and installation of the technological aspects of the project (such as anaerobic digestion systems and gas upgrading units). This can offer greater flexibility and cost control but requires more coordination and interface management by the project owner.

With a split procurement, particular attention needs to be paid to the management of the project from a health and safety perspective, ensuring that relevant considerations under the safety and health regulations are integrated from the earliest stages of project planning through to completion.

Incentives / green credentials

Under RED, Member States can introduce support schemes to help them to meet their renewable energy targets.

In Ireland, it is intended to provide capital grants for construction of new biomethane production facilities or upgrades to existing biogas plants. The first scheme provided 20% of the total capital investment costs up to €5 million per project. Projects had to have planning permission and be completed by the end of 2025.

It is not currently planned to introduce a direct price support scheme for producers (such as a feed-in tariff or sliding / fixed premium payments). The focus is instead on stimulating demand through the following mechanisms:

• Renewable Transport Fuel Obligation (“RTFO”) and Advanced Biofuel Obligation (“ABO”): Governed by the National Oil Reserves Act 2007 and statutory instruments, the RTFO and ABO impose obligations on fossil transport fuel suppliers to source 25% and 1.5% (in 2025) of fuel supplies from renewable sources and advanced biofuels respectively. Biomethane is capable of falling into both categories but, if it qualifies as an advanced biofuel, it attracts additional RTFO certificates. Producers receive RTFO certificates from the National Oil Reserves Agency (“NORA”) and suppliers purchase and surrender the number of certificates commensurate with their obligation.
• Renewable Heat Obligation (“RHO”): There will be an obligation on suppliers of fossil fuel used for heat from 2026 to 2045 based on a similar mechanism to the RTFO. Biomethane producers will receive RHO certificates from NORA and suppliers will purchase and surrender the number of certificates commensurate to discharge their obligation. The heads for a Renewable Heat Obligation Bill have been published, they include a proposal to apply a multiplier of 0.5 to certificates for domestically produced biomethane (described as subject to EU approval).
• Support Scheme for Renewable Heat (“SSRH”): Administered by the Sustainable Energy Authority of Ireland (“SEAI”), this scheme provides operational tariff or installation grant support to heat users. It is intended to support installation and/or operation of renewable heating systems by commercial, industrial, agricultural, district heating and other non-domestic heat users. DCEE wishes to extend the scheme to larger users in scope of the EU Emissions Trading Scheme which would include, for example, power plants and industry.

Biomethane producers injecting gas to the network can also receive Guarantees of Origin (“GoOs”). GoOs are of value to suppliers because their purpose under law is to demonstrate to final customers the share or quantity of energy from renewable sources in an energy supplier’s energy mix and in the energy supplied to consumers under contracts marketed with reference to the consumption of energy from renewable sources. In Ireland, S.I. 350/2022 obliges the CRU to ensure that a supplier uses GoOs for these purposes. It also obliges suppliers to use the information in GoOs to demonstrate compliance with the requirements of the EU-wide green label currently being developed under Article 19(13) of the RED.

GNI is appointed to issue GoOs in response to a request from a producer of gas from renewable sources delivered to the transportation system. The CRU consulted on arrangements to formalise arrangements around gas GoOs and a final decision is expected in Q4 of 2025.

Eligibility for green certificates and GoOs is based on sustainability standards in RED. The key parameter is achievement of certain thresholds of lifecycle greenhouse gas savings as compared to fossil fuels. Specifications are also set out as regards feedstock. Producers are required to demonstrate traceability of feedstocks and production processes, and independent third-party verification is required under schemes like ISCC, SURE, or REDcert. Ireland’s Biomethane Strategy indicates that compliance with a forthcoming Biomethane Sustainability Charter is also envisaged.

Route to market

As with other forms of renewable energy, route to market will be key for bankability and scaling up biomethane production in Ireland.

Producers enter into a bilateral agreement with gas customers or suppliers to customers in Ireland or abroad. There are several potential routes to market including Corporate Gas Purchase Agreements (long-term contracts with corporate consumers); supply agreements with fuel retailers; and direct fuel supply agreements with industrial / logistics companies. GNI also procures biomethane for shrinkage gas, awarding contracts for up to 15 years.

Contracts will often provide for a fixed price to be paid for the gas and system use (if grid-injected), invoicing and payment arrangements, and volumes to be sold and purchased. There may be a minimum take-or-pay mechanism. Contracts will provide for the delivery point and transfer of title and risk, quality specifications and testing procedures, and liability for off-specification gas. Where gas is grid-injected, the contract should make clear the parties’ respective responsibilities and liabilities in relation to nominations and balancing (see further above under “Grid Connection / Transport”).

Trades of green certificates or GoOs may be incorporated in the gas sales agreement or dealt with under a separate standalone agreement. It is likely, however, that a biomethane purchaser will wish to acquire the green credentials associated with biomethane production, whether because of the supplier’s legal obligations described above, to mitigate exposure to carbon tax or carbon prices (for those in scope of the EU Emissions Trading Scheme), or to pursue the offtaker’s own decarbonisation goals.

Notwithstanding the challenges in the sector, Ireland’s biomethane sector presents significant opportunities for developers as well as for large energy users requiring secure, decarbonised energy sources.