Biomethane as an alternative to natural gas: Ukrainian realities and prospects

Contents

  1. The current state of the biomethane market in Ukraine
  2. Possibilities of using biomethane in Ukraine
  3. Legislative regulation
  4. Conclusions

The crisis processes in the global energy sphere, which began after the full-scale invasion of Ukraine, are, according to many global forecasts, the beginning of a new energy revolution. It is evidenced, in particular, by the comprehensive policy of changing energy suppliers and changing the types of energy carriers themselves in some industries. The predicted trend that will accompany these processes is also an accelerated transformation to diversified “green” energy.

The current state of the biomethane market in Ukraine

Ukraine, having an urgent need to rebuild its damaged energy industry, to attract new investments, having great infrastructural and technological potential, is actively involved in this process, promoting a policy of diversification and orientation toward energy exports.

Biomethane is one of the directions that is developing and worth paying attention to. Given the historically developed agricultural sector, Ukraine has sufficient technical and raw material potential for the implementation of such projects. At the same time, the legislator creates the necessary legal framework for the development of the biomethane industry.

Possibilities of using biomethane in Ukraine

On October 21, 2021, the Law of Ukraine “On Amendments to Certain Laws of Ukraine Regarding the Development of Biomethane Production” (hereinafter referred to as the “Law”) entered into force, which officially established biomethane as a category in the field of legal regulation. According to various information, the launch of the first production projects was expected in the first half of 2022-2023.

The logical stage that will contribute to the development of the sector is a national (and, accordingly, international, through cross-border crossing) infrastructure for the transportation of biomethane. Given that biomethane is almost identical to natural gas in terms of its chemical characteristics, except for the percentage of oxygen, it is advisable to use the already developed gas transmission system and gas distribution network of Ukraine (hereinafter referred to as “GTS/GDN”) for biomethane logistics.

Legislative regulation

The Law adopted in October last year has already determined that biomethane producers have the right to obtain access to GTS/GDN, gas storage facilities, and LNG installations, provided that technical standards and safety requirements are met, and provided that biomethane meets the regulatory requirements in terms of its physical and chemical characteristics to natural gas. Access to GTS/GDN, gas storage facilities, and LNG installations is carried out based on the equal right of use, similar to natural gas. However, for full access, it was necessary to develop additional regulations.

Firstly, the Law required the development of a proper biomethane verification mechanism through the introduction of the functioning of the biomethane register. This request was fulfilled. On July 27, 2022, the Resolution of the Cabinet of Ministers of Ukraine “On Approval of the Procedure for the Operation of the Biomethane Register” was adopted, which determined the legal conditions for the operation of such a register and provided such a verification mechanism.

In particular, the resolution defined the procedures of the creation of a register of biomethane, its functionality, terms, and procedure for submitting information to it; creating a biomethane registry user account; issuance, transfer, distribution, and cancellation of guarantees of origin of biomethane; issuance of biomethane origin certificates; conducting an audit of biomethane production. The State Agency on Energy Efficiency and Energy Saving is responsible for maintaining the register.

Secondly, it was necessary to change the chemical and physical regulatory requirements for access to the GTS/GDN, which would correspond to the real characteristics of biomethane. Biomethane, being similar to natural gas, has a slightly higher proportion of oxygen. On August 2, 2022, the National Commission for State Regulation of Energy and Public Utilities of Ukraine (hereinafter referred to as “NEURC”) adopted the Resolution “On Amendments to the Code of the Gas Transmission System and the Code of Gas Distribution Networks”. It resolved this issue by increasing the prescribed content percentage, which unlocked access to the GTS/GDN for biomethane.

Conclusions

In addition to the high interest of investors in the field of “green” energy, we also observe the active and responsible consolidated work of the state towards the development of this sector. Currently, the state has fully ensured the functioning of all the necessary mechanisms for the full launch of the biomethane industry in Ukraine and the development of the relevant market.

Moreover, it has already been announced the intention of the developers of the Ukrainian register of biomethane to cooperate with similar registers of EU countries to ensure the possibility of selling biomethane to other countries with the exchange of guarantees (certificates) of its origin.

The export of biomethane to the European Union market in the medium term will contribute to the development of the industry in Ukraine and the achievement of energy independence.

Oleksandr Melnyk

Oleksandr Melnyk

Counsel, Head of Corporate Law and M&A practice, Attorney at law

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