Seminar of Sustainable Agribusiness Forum (SAF Ukraine) for business leaders in the agricultural sector. April 26, 2018 Details: https://saf.org.ua/en/

1. Study on incentives for production and
utilization of biomethane
April 26, 2018
Georgii Geletukha
Bioenergy Association of Ukraine

2. Biomethane production and use
Biomethane can be used for electricity production
or alternatively by utilizing of natural gas pipeline
• for electricity and heat combined production
• as a motor fuel
Connection to NG pipeline creates possibility to increase fuel efficiency use
2

3. Biogas-to-biomethane upgrading technology
3
 Production cost depends on
project scale
 Production cost for different
upgrading methods are
similar
3

4. Evolution of biomethane production in EU
The number of biomethane upgrading facilities in EU increased from 187 to 503 units within
the 5 years period (2011-2016)
Within the same period biomethane production increased for factor 23 from 752 to 17,264
GWh (from 0.08 to 1.7 bill nm3 of CH4 per year)
Average annual market grows – 87%
Source: European biogas association 4

5. Source: European biogas association
Biomethane development leaders in Europe: Germany, UK, Sweden, Switzerland
The most aggressive development during last years: UK, France
Number of biomethane plants in EU
by countries in 2015
5

6. Biogas/ biomethane potential
forecast by European Biogas Association
6

7. The national Biomethane support schemes in EU
Production site Consumption site
Direct investment support
 Grants for plant construction
 Interest reduced loan
Feed-in-tariffs, e.q. for
 Renewable electricity from CHP
 Renewable gas
Cost sharing for grid connection Obligatory quota, e.q. for the consumption of
 Renewable fuel
 Renewable heat
 Renewable electricity
Priority (at least nondiscriminatory) access
to the public grid
Investment support, e.q. for
 CHP system
 CNG cars
 Bus and vehicle fleets
Transparency in terms of technical
requirements for gas feed-in
Beneficial tax policy, exemption or refund, e.q.
in terms of
 Energy tax
 Fuel tax
 Electricity tax
 Income tax
Standardization of licensing procedures for
plant construction
Revenues from emission trade
7

8. Feed-in-Tariff Transportation sector Voluntary market
 18 countries in Europe offer FIT-system
 Every country has own national support
system
 In Germany (EEG – until 2012) increased
the market volume drastically
 Different support systems – different
remunerations: FIT on biomethane /
feed-in-Premium (bonus paid over
market price) / quote system)
 Germany is the only country, which has
an implemented GHG-saving system
 UK and the Netherlands work on known
quota based on an energetic value
 Switzerland, Austria and Sweden grant a
tax exemption over natural gas with
usage of biomethane
 Since 2016 steady increase in traded
volumes of biomethane certificates
throughout Europe
 Most significant volumes traded in
voluntary market via dena-Registry
(Germany, Switzerland, Denmark,
Sweden, Hungary)
 Vertogas trades between Netherlands
and Nordic countries
8
Green – FIT on electricity production, blue – FIT
on biomethane production, pink – tax incentives
Green – quota GHG-saving, blue – tax
exemption (CO2-tax, petrol tax), orange –
quota energetic value
Green – voluntary marketin place, gray –
unknown, low relevance
The national Biomethane support schemes in EU (2)

9. Country Feed-in-tariff for electricity Feed-in-tariff for biomethane
Germany Biogas base tariff plus bonuses for biogas
upgrading), BG 0,134 – 0,237 EUR/kWh, BM
technology bonus 0,03 EUR/kWh
-
Denmark - FIP (premium) on top of NG, final price for BM 0,0735
EUR/kWh (0,735 EUR/Nm3)
UK FIT for electricity from BG/BM is paid on top of
electricity price: 0.100-0.116 EUR/kWh
FIP on top of NG, biomethane tariff: T1: 0,086 EUR/kWh
(0,86 EUR/Nm3), T2: 0.056 EUR/kWh (0,56 EUR/Nm3), T3:
0.039 EUR/kWh (0,39 EUR/Nm3)
The
Netherlands
- The SDE+ scheme. Five categories ranging from 0.483
EUR/Nm3 to 1.035 EUR/Nm3
Austria Biogas base FIT 0,156 – 0,186 EUR/kWh,
technology bonus for biogas upgrading
0,02 EUR/KWh
-
France FIT for biogas only 0,150 – 0,175 EUR/kWh Landfills - 0,045-0,095 EUR/KWh (0,45-0,95 EUR/Nm3),
agro - 0,085-0,125 EUR/KWh (0,85-1,25 EUR/Nm3), sewage
- 0,065-0,135 EUR/KWh (0,65-1,35 EUR/Nm3)
Italy - FIP (premium) on top of NG, final price for BM 0,0796
EUR/KWh (0,796 EUR/Nm3)
Switzerland Basic tariffs for BG/BM depending on plant size
0.146-0.233 EUR/kWh, rewards bonuses for
high degree of heat utilization
-
9
The national biomethane support schemes in EU (3)
Feed-in-tariff (green tariff) for electricity is well-known in Ukraine and introduction of biomethane support scheme of the
base of feed-in-tariff for electricity seems the simplest and most realistic way.
Feed-in-tariff/premium for biomethane delivered to NG grid is universal tool to support all kind
of biomethane utilization

10. Conditions for biomethane production
and use in Ukraine
10
The possibilities for large-scale biomethane production in Ukraine are seen as
positive based on the following considerations:
Energy • High energy intensity of Ukrainian economy with a high consumption of
natural gas;
• Critical dependence of Ukraine on gas supplies from external markets, in
particular Russia;
• Tendency of increasing NG tariffs for all categories of consumers.
Agriculture • Large potential of BG/BM production from agribusinesses’ by-products and
residuals;
• Large potential for energy crops production using available arable fertile
land;
• Presence of a significant number of agricultural holdings having the financial
and land potential for large-scale BG/BM projects.
Transport • Developed infrastructure for NG transport including both main pipelines and
distribution pipelines network, providing gas access to 75% of the population
of Ukraine.
• Tradition of CNG using as motor fuel for trucks and buses with a well-
developed network of CNG filling stations

11. № Item Value
1 Methane fraction (C1) minimum 90 % mol.
2 Ethane fraction (C2) maximum 7 % mol.
3 Propane fraction (C3) maximum 3 % mol.
4 Butane fraction (C4) maximum 2 % mol.
5 Pentane and heavy hydrocarbon fraction (C5+) maximum 2 % mol.
6 Nitrogen fraction (N2) maximum 5 % mol.
7 Carbon dioxide fraction (CO2) maximum 2 % mol.
8 Oxygen fraction (O2) maximum 0.02 % mol.
9 High calorific value (25°C/20°C)
min 36.20 MJ/m3 (10.06 kWh/m3)
max 38.30 MJ/m3 (10.64 kWh/m3)
10 High calorific value (25°C/0°C)
min 38.85 MJ/m3 (10.80 kWh/m3)
max 41.10 MJ/m3 (11.42 kWh/m3)
11 Low calorific value (25°C/20°C)
min 32.66 MJ/m3 (09.07 kWh/m3)
max 34.54 MJ/m3 (09.59 kWh/m3)
12 Dew point by water at absolute pressure 3,92 МPa not higher than -8°С
13 Dew point by hydrocarbons (gas temperature not less than 0°С) not higher than 0°С
14 Mechanical impurities absent
15 Hydrogen sulfide content not more than 0.006 g/m3
16 Mercaptane sulfur content not more than 0,02 g/m3
Demand for gas content in natural gas
transportation system in Ukraine
Law of Ukraine “On the natural gas market” № 329-VIII on 09.04.2015
Article 19. “Producers of biogas or other types of gases from alternative sources shall have the right to obtain access
to gas transmission and distribution systems, gas storages, the LNG facility … in case … physical and technical
characteristics of biogas or other types of gases from alternative sources corresponds to standards applicable to
natural gas”.
There are not technical or legislative barriers for biomethane supply into Ukrainian natural gas system
by the Code #2493 of gas transportation system in Ukraine 11

12. Energy crops projects*
* Based on estimation that maize silage of
crop yield 40 t/ha would be grown
on 1 mln ha
4,0 billion m3/year
Food and beverage
industries projects
0,35 billion m3/year
Totally – up to 50 projects of 250 to
2000 m3/h
Totally – from 76 projects of 6000 m3/h to
1826 projects of 250 m3/h
Potential market for biomethane
projects in Ukrainian agriculture
12

13. Biogas projects feasibility
Item
3.2 MWe biogas plant
on sugar beet pulp
(100%)
9.6 MWe biogas plant on
maize silage (80%) +
manure (20%)
Raw material prices, UAH/t (without VAT) 45 (pulp) 400 (silage), no manure
Raw material consumption, kt/year 90 200 + 44
Economic parameters:
Electricity production (net), mill kWh/year 23.3 73.5
Total investment cost, mill EUR 11.2 25.9
Implementation by own funds:
IRR, % 18.8 21.8
Simple payback period, years 5.2 4.5
Implementation by own and credit funds (credit is 60% of capital costs with annual interest of 8% for
8 years with deferred capital repayments of 1 year):
IRR, % 16.5 19.7
Simple payback period (SPP, years
(electricity tariff is 0.1239 Euro/kWh w/o
VAT*)
6.1 5.2
* The Law of Ukraine «On amending some laws of Ukraine as for providing competitive conditions for power production from
alternative energy sources» (N 514-VIII of 04.06.2015)
13

14. Item
3.2 MWe biomethane
plant on sugar beet
pulp (100%)
9.6 MWe biomethane
plant on maize silage
(80%) + manure (20%)
Raw material prices, Euro/t (without VAT) 1.4 (pulp) 12.5 (silage), 0 (manure)
Raw material consumption, kt/year 90 200 + 44
Economic parameters:
Biomethane production, Nm3/year 780 2330
Electricity production (net), mill kWh/year 19,7 61,6
Thermal energy production (60% of total heat
amount), Gcal/year
14800 41400
Capital cost (biogas), mill EUR 8,5 20,1
Capital cost (electricity), mill EUR 2,7 5,8
Capital cost (biomethane), mill EUR 3,2-3,5* 5,5-6,0
Cost of biomethane production (for zero biogas
cost), EUR/1000 м3 145-195 120-160
IRR**, % 16,4 (14,4 )*** 21,2 (18,8)
SPP, years (electricity tariff: 0,1616 EUR/kWh
w/o VAT, heat tariff: 1200 UAH/Gcal w/o VAT
6,1(6,9) 4,8(5,2)
14
* Low range – connection to low pressure distribution natural gas network, high range – for high pressure natural gas pipes
**Implementation by 60% credit with annual interest of 8% for 8 years with deferred capital repayments of 1 year)
*** In brackets – connection for high pressure main NG piping system
Biomethane projects feasibility

15. 15
Biomethane projects feasibility (2)
Electricity tariff,
EUR/kWh w/o
VAT
Heat tariff, UAH/Gcal w/o VAT
1000 1200 1400 1600 1800
0,12 10,4 11,2 12,1 12,9 13,7
0,14 15,3 16,1 16,9 17,7 18,5
0,16 20,0 20,8 21,5 22,3 23,1
0,18 24,6 25,3 26,1 26,8 27,6
0,20 29,1 29,9 30,6 31,3 32,1
Electricity tariff,
EUR/kWh w/o
VAT
Heat tariff, UAH/Gcal w/o VAT
1000 1200 1400 1600 1800
0,12 7,7 8,6 9,4 10,3 11,1
0,14 12,8 13,6 14,4 15,2 16,0
0,16 17,6 18,4 19,2 19,9 20,7
0,18 22,3 23,0 23,8 24,5 25,3
0,20 26,8 27,5 28,3 29,0 29,8
Connection to low pressure distribution NG network Connection to high pressure main NG piping system
Electricity tariff,
EUR/kWh w/o
VAT
Heat tariff, UAH/Gcal w/o VAT
1000 1200 1400 1600 1800
0,12 8,1 8,8 9,4 10,1 10,7
0,14 11,9 12,5 13,1 13,7 14,3
0,16 15,5 16,1 16,7 17,3 17,8
0,18 19,0 19,6 20,1 20,7 21,3
0,20 22,4 23,0 23,5 24,1 24,6
Electricity tariff,
EUR/kWh w/o
VAT
Heat tariff, UAH/Gcal w/o VAT
1000 1200 1400 1600 1800
0,12 5,8 6,5 7,1 7,8 8,5
0,14 9,8 10,4 11,0 11,6 12,3
0,16 13,5 14,1 14,7 15,3 15,8
0,18 17,0 17,6 18,2 18,7 19,3
0,20 20,5 21,0 21,6 22,1 22,7
Connection to low pressure distribution NG network Connection to high pressure main NG piping system
IRR (%) vs heat and electricity tariffs for project: 9.6 MWe biomethane plant on maize
silage (80%) + manure (20%) ) – CAPEX 31,4-31,9 mln EUR*
IRR (%) vs heat and electricity tariffs for project: 3.2 MWe biomethane
plant on sugar beet pulp (100%) ) – CAPEX 14,4-14,7 mln EUR*
* Implementation by 60% credit with annual interest of 8% for 8 years with deferred capital repayments of 1 year)

16. 16
Biomethane projects feasibility (3)
Maize silage
price, EUR/t
w/o VAT
Biomethane tariff, EUR/1000m3 w/o VAT
400 500 600 700 800
10 10,2 17,0 23,4 29,6 35,9
15 6,5 13,7 20,2 26,6 32,8
20 2,3 10,3 17,0 23,5 29,7
25 - 6,6 13,8 20,3 26,6
30 - 2,4 10,4 17,1 23,5
Maize silage
price, EUR/t
w/o VAT
Biomethane tariff, EUR/1000m3 w/o VAT
400 500 600 700 800
10 6,9 13,9 20,3 26,5 32,6
15 2,9 10,6 17,2 23,5 29,6
20 - 7,0 14,0 20,4 26,6
25 - 3,0 10,7 17,3 23,6
30 - - 7,1 14,1 20,5
Connection to low pressure distribution NG network Connection to high pressure main NG piping system
Sugar beet
price, EUR/t
w/o VAT
Biomethane tariff, EUR/1000m3 w/o VAT
400 500 600 700 800
0 8,8 14,2 19,2 24,0 28,8
5 4,9 10,6 15,8 20,7 25,5
10 0,0 6,8 12,3 17,4 22,3
15 - 2,5 8,6 14,0 19,0
Sugar beet
price, EUR/t
w/o VAT
Biomethane tariff, EUR/1000m3 w/o VAT
400 500 600 700 800
0 6,1 11,5 16,5 21,3 26,0
5 1,7 7,9 13,1 18,0 22,8
10 - 3,9 9,6 14,7 19,6
15 - - 5,8 11,3 16,3
Connection to low pressure distribution NG network Connection to high pressure main NG piping system
IRR (%) vs biomethane and maize silage price for project: 2333 m3/h of biomethane plant
on maize silage (80%) + manure (20%) ) – CAPEX 25,6-26,1 mln EUR*
IRR (%) vs biomethane and sugar beet price for project: 780 m3/h biomethane plant
on sugar beet pulp (100%) ) – CAPEX 11,7-12,0 mln EUR*
* Implementation by 60% credit with annual interest of 8% for 8 years with deferred capital repayments of 1 year)

17. Legislation measures for biomethane support
17
Categories of energy units
Green tariff, EUR/kWh
01.01.19 -
1.12.19
01.01.20 -
31.12.24
01.01.25 -
31.12.29
01.01.30 -
31.12.39
For electricity produced from biomethane with more
than 60% of heat utilization by unit with installed
electrical capacity > 5 MWe
0,160 0,160 0,160 0,160
For electricity produced from biomethane with more
than 60% of heat utilization by unit with installed
electrical capacity < 5 MWe
0,180 0,180 0,180 0,180
Green tariff for electricity produced from biomethane
Law of Ukraine "On amendments to the law of Ukraine "On Alternative Energy Sources“
Green tariff/premium for biomethane delivered to the natural gas grid
Law of Ukraine "On amendments to the law of Ukraine "On “On the natural gas market” № 329-VIII on
09.04.15
 Guarantee of biomethane price for supplier (at least 600-800 EUR/1000m3)
Amendments to:
 NRCEU Decree 2493 “On approval of the Code of gas transportation system” (registered by Ministry of Justice №
1378/27823, 06.11.2015)
 NRCEU Decree 2494 “On approval of the Code of gas distribution system”
 Etc.

18. Function: mass balancing of biomethane distributed within Ukrainian natural gas system and potentially along the European
NG network
Potential possibility to exchange the Guarantees of Origin (GoO) with foreign countries
Status in EU: cooperation among the existing national biomethane registries, creation of ERGaR (European Renewable Gas
Registry) - non-profit international association aiming for the recognition of its biomethane mass balancing voluntary scheme
by the EC under the RED (Renewable Energy Directive)
18
Development and introduction of the
national register of biomethane production and use
Draft Resolution of Cabinet of the Minister of Ukraine “About the national register of
biomethane production and use”
Appointment of responsible governmental body (proposal – State Agency on Energy Efficiency and
Energy Saving of Ukraine)
Responsible governmental body will be responsible for the development of the documents:
 Biomethane registry provisions
 Functional description of the biomethane registry

19. Conclusions and recommendations
 Biomethane (BM) production and use demonstrates fast development in EU counties, the level of
annual production was 1.7 bill m3 of BM in 2016
 Prognosis of BM production issued by European biogas association – 18.0 bill m3 of BM in 2030
 Total potential of BM production in Ukraine is over 4 bill m3 of BM, the possibilities for large-scale
biomethane production in Ukraine are positive
 At the moment BM production is not completive with NG market price and need support all over the
world
 The most popular support mechanisms in EU countries is feed-in-tariff (feed-in-premium) for BM or
electricity produced from BM
 Feed-in-tariff (green tariff) for electricity is well-known approach in Ukraine that could be
implemented by simple means, feasible production of electricity from BM is possible with green
tariff 0.16 EUR/kWh for project above 5 MWe and 0.18 EUR/kWh less than 5 MWe
 Alternative -feed-in-tariff/premium for biomethane delivered to NG grid, it is universal tool to
support all kind of biomethane utilization (at least 600-800 EUR/1000m3 )
 Another first priority is development and implementation of the “National register of biomethane
production and use”. It will creates possibilities for mass balancing of BM distributed within
Ukrainian NG system and potentially along the European NG network
19