France Offers $1.6 Billion Aid to Grow Biomethane Production

The European Commission has approved a French proposal to provide EUR 1.5 billion ($1.6 billion) in government assistance for renewable natural gas production projects in the country.

The package caters to new installations with an expected annual biomethane production capacity of over 25 gigawatt hours a year, the Commission said in a statement. Beneficiaries will be selected through competitive bidding.

The support comes in the form of 15-year two-way contracts for difference. “The amount of aid corresponds to the difference between the strike price, determined in the tender offer of the beneficiary (‘pay as bid'), and the market price of natural gas”, the Commission said. “If, however, the market price of natural gas is higher than the strike price, the difference between the two prices will be paid back to the State”.

A contract for difference guarantees revenue for operators while protecting the public from high prices. This arrangement ensures “producers do not gain windfall profits from excessively high market prices, while at the same time always having revenue certainty guaranteed by the government”, the Commission explains on its website.

Assessing the package under fair competition rules, the Commission decided that the French state aid is “necessary, appropriate and proportionate to accelerate the green transition and facilitate the development of certain economic activities, which are of importance for the implementation of the REPowerEU Plan and the Green Deal Industrial Plan, in line with Article 107(3)(c) TFEU [Treaty on the Functioning of the European Union] and the conditions set out in the Temporary Crisis and Transition Framework”.

REPowerEU, passed February 2023, outlines the European Union’s strategy to achieve independence from Russian fossil fuels by 2027. Under the strategy, biomethane is listed as one of the short- and medium-term fuels to reduce natural gas imports. REPowerEU aims to raise the production of biomethane, or biogas upgraded to be used in place of conventional natural gas by raising its methane content, to 35 billion cubic meters (1.2 trillion cubic feet) by 2030.

The EU Green Industrial Plan is a package of manufacturing-focused initiatives supporting the region’s goal of climate neutrality by 2050.

Meanwhile, the TCTF allows EU countries to use the flexibility provided by the bloc's state aid rules to cushion the economic impacts of the Russia-Ukraine war.

France has set targets of raising the share of renewable gases in national natural gas consumption to 10 percent by 2030 and increasing biogas output to 24–32 terawatt hours per year HHV by 2028. The government has allotted EUR 9.7 billion under the Multiannual Energy Plan to support methanization.

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