A Ukrainian company has, for the first time, transported biomethane via the country’s domestic gas transmission system, marking a significant step towards its ambition to export the renewable energy source to Europe, UBN reported on October 2.

VITAGRO, a group with interests in agriculture, energy, and construction, supplied biomethane into Ukraine’s gas grid, positioning the country to begin exporting the fuel.

“This is the first and only such event in Ukraine's entire energy industry,” the company said in a statement.

The €6mn biomethane plant is currently operating at 60-70% capacity, delivering around 6,000 cubic metres of gas daily. Full capacity is expected by the end of October, and VITAGRO is poised to begin exporting biomethane once sufficient volumes are accumulated, with sales possibly starting in November.

Ukraine’s Regional Gas Company (RGK) was the first biomethane plant to its gas network last year. This plant, located in the Chernihiv region, will produce approximately 3mn cubic metres of gas each year, which will be used to supply nearly 1,500 customers, from the circa 20bcm of gas that Ukraine already produces domestically.

Ukraine currently is home to 77 biogas plants in operation and a capacity of up to 260mn cubic metres annually.

Ramping up exports

Adomas Audickas, a senior executive at MHP, one of Ukraine's leading agricultural holdings, that five plants, including two owned by MHP, could collectively export up to 100mn cubic metres of biomethane by year-end and the government estimates exports could reach 1bcm by 2030, against the 15bcm of Russian gas the country currently exports to the EU. Over 10 agricultural holdings have set their sights on the burgeoning biomethane market and several have built plants or plan to do so.

“If the open markets and buyers are found, Ukraine will be able to export about 100mn cubic metres of biomethane per year from five plants by the end of the year,” Audickas said, cited by UBN. He added that MHP alone could contribute 35mn cubic metres annually. “If all of this works, there will be more and more such projects, and new manufacturers will appear.”

Other estimates put the numbers much higher, suggesting Ukraine could export 5bcm of biomethane within five years, attracting €5bn in investment. As bne IntelliNews reported, the renewables sector has been one of the few sectors to attract significant investment from both domestic and international players pre-war attracting some $4bn into wind and solar power generation. Ukrainian President Volodymyr Zelenskiy laid out a vision of Ukraine as a “hub for modern green energy” in Europe to over 1,000 Western leaders and top European businesspeople in his comments to the Ukraine Recovery conference held in London in June last year.

However, there are still obstacles to overcome; Audickas pointed out that certain European Union markets, such as Germany, remain closed to pipeline-based biomethane imports for the meantime.

Challenges and opportunities

Ukraine's shift towards renewable energy is partly driven by the impending expiration of its Russian gas transit deal at the end of this year, leaving a vacuum in Europe’s energy supply that Ukraine hopes to fill. Biomethane could fill part of the hole left in Ukraine’s gas delivery business to Europe and further reduce its dependence on Russian gas.

Nevertheless, Ukraine faces significant challenges in attracting investment to its renewable energy sector. According to Oleksandr Podprugin, a top manager at German firm Notus Energy, while green energy should be a priority for Ukraine, investors perceive a gap between the government’s declarations and actual support for renewable energy projects.

“Donors and investors who work or want to work with Ukraine feel the gap between declarations and genuine support because they do not think that [renewable energy sources] are a priority at the state level,” Podprugin said, UBN reports.

To stimulate investment, Ukraine is preparing to host its first green energy auction at the end of this month. The auction, organised by state-owned enterprise Guaranteed Buyer, will allocate support quotas for companies producing renewable energy. The first lot will offer an annual quota for 11 MW of electricity generated from solar power.

The Ukrainian government is also exploring further measures to incentivise the construction of more biogas producers and powerplants. Andriy Gerus, head of Ukraine’s parliamentary energy committee, earlier this year announced plans to establish a fund that would guarantee profitability for renewable energy projects, subsidising producers if prices fall below a certain threshold.

Ukraine is working to create a more investor-friendly environment, but as Podprugin noted, the country still faces competition from neighbouring European nations, which offer lower logistics and insurance costs amid the ongoing war. As bne IntelliNews reported, Poland is also investing heavily into biogas and also has a large agricultural base to provide the feedstock to make biogas.

By year-end, seven new biomethane projects with a total capacity of 111mn cubic metres will be launched across the :

● A Hals Agro project in the Chernihiv region, with a capacity of 3mn cubic metres per year

● A project from the Vitagro Group of Companies in the Khmelnytskyi region (3mn cubic metres)

● The Teofipol Energy Company’s project in the Khmelnytskyi region (56mn cubic metres)

● A Hals Agro project in the Kyiv region (3mn cubic metres)

● A YUM Liquid Gas project in the Vinnytsia region (11mn cubic metres)

● A MHP project in the Vinnytsia region (24mn cubic metres)

● A MHP project in the Dnipropetrovsk region (11mn cubic metres)