Biomethane Purchase Agreements

Biomethane is a purified form of biogas produced from the breakdown of organic matter, such as agricultural residues, manure, sewage sludge, organic waste and landfill gas. 

Biomethane is fully compatible with the existing gas grid and customers' installations. Biomethane can be used for residential and industrial heating, in industrial processes, or for road and maritime transport in the form of bio-CNG and bio-LNG. Biogenic CO₂ generated as a by-product increasingly opens additional value streams in e-fuels, agri-food and chemicals sectors. 

A Biomethane Purchase Agreement is a long-term contract between a biomethane producer and a buyer that typically defines: 

• Contracted volumes
• Delivery profile
• Pricing structure
• Feedstock type
• Sustainability attributes through certificates (Proof of Origin, Proof of Sustainability) 

Overall, three main delivery models exist: 

• Direct BPAs: The consumer enters a direct contract with the producer, who guarantees the delivery of a specified volume of biomethane along with the corresponding certificates at an agreed-upon price.
• Indirect BPAs: The consumer enters a contract with an intermediary, a supplier, to source all or a part of its gas consumption from a biomethane producer. The consumer also receives the associated certificates.
• Financial BPAs: The consumer enters a contract with the supplier at market price. In exchange for certificates, the consumer compensates the producer for the difference between the market price and the agreed-upon price (Contract for difference). 

Biomethane pricing under each of these BPA delivery model typically reflects three components: production, transport and distribution, and certificates. 

Production costs vary broadly depending on the technology deployed, plant size, feedstock type, applicable support mechanisms, and whether the facility is a greenfield or brownfield project. 

CAPEX typically represents the largest share of total production costs, making economies of scale a key determinant of competitiveness. OPEX drivers also vary by plant size: smaller facilities tend to be driven by pre-treatment and maintenance, while larger plants are more influenced by labour and additives. Feedstock costs can either be a net expense or a revenue stream, depending on the setup; for example, facilities processing municipal waste or wastewater sludge may earn gate fees, resulting in negative net feedstock costs. 

Industrial, utility, and transport players that want to secure green gas for the longer term can enter a BPA and unlock multiple sources of value: 

• Carbon reduction: biomethane is accounted for under the EU Emissions Trading System (EU ETS), actively supporting decarbonization efforts.
• Supply security: BPAs reduce the risk of supply disruptions, offering stability for industries relying on a continuous supply for processes.
• Price stability: BPAs shield consumers from the volatility of energy markets, offering cost predictability.
• Traceability: BPAs allow consumers to verify the origin and sustainability of the energy through certificates
• Positive externalities: BPAs support waste valorization and rural economies
• Customization: consumers can tailor the terms of the agreement to their specific needs. 

However, the market is still maturing, which requires BPAs to be carefully structured. Several risks must be considered. These include production variability, evolving regulatory frameworks and support schemes, and price exposure if contracts are not aligned with market fundamentals. In addition, quality risks may arise if gas specifications are not clearly defined and properly monitored. 

By the end of 2024, Europe had reached around 60 TWh (6.1 bcm) of biomethane production capacity. This remains a long way from the European Commission’s 2030 target of 342 TWh (35 bcm). 

More than 21 TWh (2.1 bcm) had been contracted through BPAs based on publicly disclosed information by April 2026, cumulated over the full duration of the contracts. More than 20 contracted BPAs across Europe that are publicly known.[PT1] 

Contract durations range from 3 to 15 years, while annual volumes vary from 10 GWh to 400 GWh, reflecting the diverse needs of contracting companies. 

Most agreements have been signed by industrial players, but the transport sector—both road and maritime—as well as gas suppliers seeking to green their offerings, are also increasingly active.