Where does the biogas market stand in Poland?
Biogas and biomethane play a vital role in EU regulations and thus also in the Polish legal system. The accelerating energy transition resulting in billions of dollars of investment in weather-dependent renewable energy sources also requires balancing energy production with controllable sources, among which biogas looms large. Biogas and biomethane production is also a key arc of the circular economy and the greening of agriculture supported by EU legislation—especially in times of turmoil on the market for natural gas from fossil sources.
In a series of articles over the coming months, we will present the most important aspects of the functioning of the biogas and biomethane market in Poland, as well as describe the key challenges investors face.
Current state of development of the biogas sector in Poland
Despite the significant share of agriculture in the country’s GDP (in 2021 it was 2.2%, as compared to an EU average of 1.6%) and the considerable area of agricultural land (c. 60% of the country’s area), Poland still has a negligible share of biogas in the national energy mix. At the beginning of 2024, 163 agricultural biogas plants, operated by 137 entities, with a total installed generating capacity of c. 155 MW, producing some 634 million m3 of biogas annually, were listed in the register of agricultural biogas producers maintained by the director of the National Support Centre for Agriculture. Additionally, installations using landfill biogas and biogas from wastewater treatment plants have a combined installed capacity of c. 150 MW, bringing the installed capacity of biogas plants in Poland to a total of just over 300 MW. The reasons for such a small share of biogas plants in the mix of renewable energy sources in Poland may be found in the lack of administrative encouragement for such projects, the complexity of the production itself, and the hesitancy of financial institutions, which have preferred to finance simpler renewables, photovoltaics and wind power plants.
Growth potential of the biogas market
Meanwhile, according to estimates by the Ministry of Agriculture and Rural Development, the availability of substrate in Poland makes it possible to power biogas plants with a total capacity of up to 2 GW, which would translate into production of up to 8 billion m3 of biogas. Additionally, such projects would avoid emissions of 12.5 million tonnes of CO2 equivalent per year and produce up to 60 million tonnes of digestate, which would reduce the need for fertiliser by 25%. According to the European Commission’s REPowerEU communication of 8 March 2022, aiming to achieve independence from gas imports from the Russian Federation, the European Union plans to increase sustainable biomethane production to 35 billion m³ by 2030 and has allocated EUR 37 billion for this purpose. At the same time, the Commission indicates that priority must be given to generating biomethane from organic waste and forest and agricultural residues, to avoid impacts on land use and food security. Indeed, currently the vast majority of the substrate used in agricultural biogas plants is corn silage, and, as the Commission points out, the emphasis should be on reducing the use of dedicated crops in biogas and biofuel production. It is also worth noting that the reduction in biogas production from dedicated agricultural crops will be affected by the introduction of E10 gasoline, containing more bioethanol produced from corn, into general use in Poland. It is indicated that meeting domestic demand for bioethanol will require up to half a million tonnes of corn for this purpose, further reducing the availability of this substrate for biogas production. On the other hand, this will increase even more the demand for biogas plants using agricultural post-production waste.
Biogas production is a huge opportunity for the circular economy, as industrial livestock farms often already have great problems managing manure, which is an unavoidable waste. While it can be used in agriculture as a valuable natural fertiliser, its direct use is often opposed by nearby residents due to noxious emissions and statutory restrictions on how much can be used. This problem is solved by biogas plants, which get rid of this nuisance in the process of biogas production. At the same time, their construction may soon become necessary also due to advanced plans to bring more types of industrial animal breeding under the Industrial Emissions Directive, and the need to reduce emissions of the resulting gases into the environment. The digestate also contains nitrogen compounds much more easily absorbed by plants, so it can largely replace the use of fertilisers and plant protection products, while also generating an additional income stream. This fits perfectly within the EU’s climate policy and the role agriculture plays in reducing greenhouse gas emissions in the EU’s plans.
The support system for biogas in Poland
Support for biogas generation in Poland is governed by the Renewable Energy Sources Act of 20 February 2015 and divides biogas installations into three categories based on their installed capacity:
- Biogas plants with a capacity of up to 500 kW
- Biogas plants with a capacity of 500 kW – 1 MW
- Biogas plants with a capacity greater than 1 MW.
For biogas plants up to 1 MW there is a system of guaranteed tariffs: the feed-in tariff (FiT) for installations with a capacity up to 500 kW, and a price subsidy or feed-in premium (FiP) for installations with a capacity of 500 kW – 1 MW.
Biogas plants with a capacity of more than 1 MW can take advantage of the auction system. In theory, the auction system is also available for installations with a capacity of less than 1 MW, but owners of small biogas plants do not use it in practice because the FiT and FiP systems are more profitable for them.
The FiT system allows biogas electricity to be sold at a fixed price equal to 95% of the reference price to an obligated seller or selected entity, while the FiP system allows biogas electricity to be sold at a fixed price equal to 90% of the reference price exclusively to an entity selected by the generator, as a rule for a period of 15 years. The reference price varies depending on the specific technology and capacity of the installation and is set by the Minister of Climate and Environment by regulation. Currently, the highest reference price applies to the smallest installations using agricultural biogas in high-efficiency cogeneration, and amounts to PLN 1,025 (c. EUR 236) per MWh—which is currently more than two and a half times higher than the price of electricity on the power exchange.
In principle, the auctions used by power generators at biogas plants with a capacity greater than 1 MW consist in submission of bids from competing generators to sell a certain amount of electricity in a given calendar year. The generator that wins the auction obtains the right to cover the negative balance, i.e. the difference between the selling price of electricity on the market and the winning bid submitted in the auction, for a period also not exceeding 15 years. However, due to the less-attractive reference prices for biogas plants larger than 1 MW than those for small biogas plants, forced competition by rejection of extreme bids, and a significant increase in the costs of investment and purchase of biogas substrate, the auctions designed for large biogas plants have gone unresolved for years.
Distinctions between installations by capacity
Notably, the distinctions between large and smaller biogas plants are not limited to differences in support systems. Small agricultural biogas plants have also enjoyed unwavering political support from successive Polish governments, as well as opposition groups. This is because family farms—small by European standards—which are the default owners of such installations are recognised in the Polish Constitution as the foundation of the state’s agricultural system. For this reason, almost three-fourths of biogas plants in Poland are installations with a capacity of less than 1 MW. And small agricultural biogas plants are the subject of a special law facilitating preparation, implementation and operation of agricultural biogas projects, which will also be available to investors in slightly larger units.
We will write more about this act and the opportunities it has opened up for investors in the next article in the series. Certainly, larger biogas plants, capable of managing industrial quantities of substrate and benefiting from economies of scale, have greater opportunities than small installations to create additional revenue streams (e.g. by producing high-value natural fertilisers).
Conclusion
Undoubtedly, the role of biogas and biomethane will continue to grow in Poland, driven by the increasing regulation of agriculture in the fight against climate change, restrictions on greenhouse gas emissions by the agricultural sector, the need to dispose of lighter waste in a circular economy, and the desire to balance energy production from renewables insulated from external supply factors, while replacing natural gas sourced from the Russian Federation.
At the same time, Poland has huge growth potential ahead of it as a biogas market, as this technology is still being used on only a limited scale. In turn, the significant role of the agri-food sector in the country should ensure a steady supply of raw materials for biogas production going forward. It is worth keeping an eye on this market—also as the regulatory environment continues to undergo dynamic changes.
Rafał Pytko, Igor Hanas, adwokat, Energy practice, Wardyński & Partners
