14 / 06 / 23 - 6 minute read
Nuclear fusion is the process that powers the sun and other stars by taking pairs of light atoms and forcing them together and has long been mooted as the answer to a sustainable, clean supply of energy for the planet.
This latest breakthrough in February, encouraging as it is, produced an amount of energy equivalent to that required to boil a couple of kettles and it remains anyone’s guess as to when, and if, nuclear fusion will be available for use at a major scale
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Hydrogen, too, offers the chance to move away from fossil fuels and towards clean, renewable energy, but despite being a great deal more tangible than nuclear fusion, this still remains a solution for the future. Exciting pilot projects are underway to explore the feasibility of hydrogen storage at the PATRIZIA-owned caverns in the small village of Etzel in Germany – currently used to host more than 10 million metric tons of crude oil, which is part of the 90-day supply held in reserve by Belgium, Germany and the Netherlands.
Given the urgent need to decarbonise the energy sector (which is responsible for 73.2% of global greenhouse gases) today, hydrogen and nuclear fusion point to the path ahead, but alternatives which can be produced at scale are needed immediately to support this energy transition.
Bioenergy – a renewable energy generated by converting biomass into heat, electricity, biogas and biofuels including ethanol, biodiesel and sustainable aviation fuel – is one such alternative.
At its simplest, most traditional form, bioenergy is created through burning biomass such as wood, animal waste and charcoal. This traditional – and harmful – bioenergy practice is being phased out. While those same materials still form part of the modern biomass mix, which includes agricultural crops and biodegradable waste, the conversion process to create modern bioenergy is thankfully more refined and climate-friendly.
In addition to controlled burning techniques, there is anaerobic digestion, where microorganisms are used to break down organic waste material, and thermochemical conversion, where various materials are heated at high temperatures to produce electricity and renewable gases.
Governments, understandably, seek to create an accommodating environment to support the production of bioenergy in their territories. Policy goes hand-in-hand with performance. The US is a case in point.
Prior to 2010, the country only imported bioenergy yet, thanks to favourable conditions enabled by two policies in the mid-2000s, the US has ever since been a net exporter of bioenergy. The Energy Policy Act (EPA) arrived in 2005 and included the Renewable Fuel Standard (RFS) that mandated a minimum volume of renewable fuels in all transportation fuel and tax credits for biofuel producers, both of which remain in place today.
Two years later saw the introduction of the Energy Independence and Security Act (EISA), which targeted an almost eight-fold increase in the volume of biofuel produced by 2022 and required feedstock diversification, moving away from corn starch and towards advanced biofuels that use feedstocks including sugar and cellulose.
These policies received extra oxygen from last August’s Inflation Reduction Policy, introduced by the current president of the US, Joe Biden, which confirmed the RFS and introduced new tax credits for sustainable aviation fuel (SAF) and other biofuels. The US is now one of the most influential markets for bioenergy production.
Oliver Hailzl, Director of Infrastructure at PATRIZIA
When it comes to biogas – just one of the many bioenergy outputs - Europe is by far the largest producer (according to the most recent statistics in 2018), producing around 18 megatonnes of oil equivalent (Mtoe), with China the second largest producer at under 8 Mtoe. Within Europe, Germany is the biggest market with Italy the second biggest and Denmark, France and the Netherlands boasting healthy biogas industries.
Biogas can be upgraded to biomethane, also known as renewable natural gas, which is indistinguishable from natural gas. This means it is a perfect substitute for fossil fuel natural gas and can be used in existing gas transmission and distribution infrastructure, and end-user equipment and vehicles without the need for adaptation or CAPEX. Unsurprisingly, given its world-leading production of biogas, Europe is also the world’s largest producer of biomethane.
This position is likely to be maintained with the EU seeking to scale up biomethane production to 35 billion cubic metres (bcm) by 2030 (from its current production output of 3 bcm) as a direct substitute for natural gas. This will require an estimated investment of €37 billion over the next eight years.
PATRIZIA Infrastructure has kept a watching brief on the biogas industry for a few years, entering the market last year with its investment, on behalf of its clients, in Italian bio-LNG (liquefied natural gas) producer, Biomet. The c. €75 million investment (which also includes additional growth capex) gives PATRIZIA Infrastructure an 80% majority stake in the producer. Biomet will be Europe’s largest plant producing biomethane LNG from bio-waste, as well as Italy’s first facility that is directly connected to the Snam national transport gas grid, with an onsite filling station.
Biomet is a vertically integrated biogas and bio-LNG producer based in Milan, Italy. The investment consists of a biogas production and upgrading plant, an LNG liquefaction plant that produces bio-LNG and additional distribution infrastructure. This includes a filling station on site of the LNG liquefaction plant next to a logistics distribution centre, providing strong demand for bio-LNG.
Biomet plays an important role in the low-carbon circular economy. Each year, more than 40,000 tonnes of bio-waste will be transformed into 5 million cubic metres of biogas, 12 million kilograms of fertiliser and 24 million litres of water. Its efforts have not gone unnoticed with Forbes magazine ranking Biomet as one of Italy’s 100 most sustainable companies in 2022.
Bio-LNG is carbon neutral, available today and takes advantage of existing infrastructure and engine technology, supporting Italy’s net zero carbon aspirations. The decarbonising positives are clear, but how does the investment stack up against the numbers? “One of the key benefits of Biomet is that this business provides energy independence while at the same time delivering resilient cashflows,” says Oliver Hailzl, Director of Infrastructure at PATRIZIA. “In the case of Biomet, waste gate fees are received for taking the bio-waste from suppliers, which combined with regulatory incentives and bio-LNG sales, delivers diversified revenues.”
In Italy, biogas and LNG are well established with over 100 gas stations fuelling trucks and cars around the country with LNG and many transportation companies recently opting for this cleaner fuel to reduce carbon emissions. A switch to bio-LNG could further reduce the transportation industry’s carbon emissions in the country.
The investment also offers the scope for growth opportunities, as Oliver explains when we speak in March. “We bought at a late construction stage. The filling station has been operational since last year, whereas the liquefaction facility and the biomethane plant are in the final stages of construction and on track to ramp-up in July 2023.
“There is better value in late-stage construction. One part of our role is finalising construction of the facilities and another is supporting the management to build out their team for future growth.
“The biomethane plant has a waste intake capacity of 40,000 tonnes per year, but has already been designed for a 50% increase to over 60,000 tonnes. The liquefaction capacity is also very scalable and can be increased threefold from the 8,800 tonnes of bio-LNG per year it currently hosts to 26,400 tonnes.
“A big growth opportunity is in third-party biogas upgrading plants from agricultural feedstock. The short-term growth plan includes four plants that produce biomethane from agricultural feedstock, but this could rise to more than 10. There are lots of opportunities for growth and partnerships in the sector.”
One example of activity in the sector is Goldman Sachs announcing in February its plans to deploy €1 billion in the European biomethane sector. More investments into the sector will follow, with Oliver pointing out, with a smile, that PATRIZIA Infrastructure has gained a head start on the competition.
And what of biogas’s future when hydrogen enters the fray? The relationship is symbiotic, according to Oliver: “There is the potential to use the water waste from the plants to be converted into hydrogen fuel. In the future, we see there being a push to combine biogas with hydrogen.”