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    [NGW Magazine] Italy Makes its Traffic Greener

Summary

This article is featured in Volume 3, issue 10 of NGW Magazine - Biomethane is set to take over EU’s largest natural gas vehicle market thanks to the government's $5.5bn incentive scheme in Italy, where the necessary infrastructure – and popular acceptance – are already in place to cut particulate matter as well as carbon dioxide.

by: Beatrice Bedeschi

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Europe, Premium, NGW Magazine Articles, Volume 3, Issue 10, Renewables, Corporate, Political, TSO, Infrastructure, Pipelines, News By Country, EU, Italy

[NGW Magazine] Italy Makes its Traffic Greener

Biomethane is set to take over EU’s largest natural gas vehicle market thanks to the government's $5.5bn incentive scheme in Italy, where the necessary infrastructure – and popular acceptance – are already in place to cut particulate matter as well as carbon dioxide.

Prospects for biomethane producers have never looked more promising in Italy, as a recently implemented €4.7bn ($5.5bn) incentive package is expected to prompt a shift from natural gas of fossil origin towards renewable gas in what is Europe’s largest natural gas vehicle (NGV) market, industry sources told NGW.

Under the scheme Promotion of the use of biomethane and other advanced biofuels in transport, published on Italy’s Official Gazette on March 19andset to start in June, producers are to receive a premium which allows them to compensate for the higher costs of producing biomethane and compete with fossil fuels in the transport sector. The premium, which is adjusted every year based on production costs, can be increased if producers also make investments to improve the distribution and liquefaction of advanced biomethane.

The measures would help Italy achieve its target of 10% of renewable fuels in the transport sector by 2020, in line with the EU’s Renewable Energy Directive, by leveraging the already strong position achieved in the NGV sector.

In 2016, Europe had 1,315,717 gas-fuelled vehicles, of which almost a third – 1,001,614 – are in Italy, according to data from the Natural and bio Gas Vehicle Association Europe. Its fleet, Europe’s largest, uses over 1bn m³/year, according to the president of Italian association Consorzio Italiano Biogas (CIB), Piero Gattoni.

Thanks to the new incentive scheme, and with more volumes coming on stream in the country, that gas might soon be replaced by biomethane. The decree sets an annual cap of 1.1bn m³/year of biomethane to be financed through incentives, directly targeting NGV’s annual gas demand, Gattoni explained. Projects will receive incentives for a maximum period of ten years.

The scheme, which will run from 2018 to 2022, is to be funded by transport fuel retailers, which are required by law to sell a certain amount of biofuels and biomethane along with traditional fuels. Gattoni expressed “satisfaction” at the new measures, stressing they will play a pivotal role in allowing “new projects to take off” in Italy. Overall, Italy has the potential to produce some 8-10bn m³/year of biomethane by 2030, CIB estimates.

The subsidy scheme was deemed by the European Commission (EC) to be compliant with anti-trust rules, as it “will encourage the production and use of advanced biofuels in Italy, while limiting distortions of competition,” the competition commissioner Margrethe Vestager said in a statement on March 1. “This is yet another step towards greater use of renewable energy in Europe and helping Italy's transition to more environmentally friendly fuel sources.”

Advanced biofuels and biomethane are “particularly suited to help the EU achieve its climate and energy objectives” as they are “the most sustainable and environmentally friendly biofuels,” the statement continued.

They are produced from feedstock that do not require agricultural land for their production, such as waste, agricultural residues, and algae and “therefore, they pose a significantly lower risk of indirect CO2 emissions”. It added however, that production costs are “much higher than fossil fuels”, hence the need for incentives.

Biogas producers prepare for the shift

According to CIB data, Italy has some 1,500 biogas production units, using anaerobic digestion to turn agricultural bi-products and waste recycling into some 2.5-3bn m³ annually. It is mostly destined for power generation. “Italy is the second biggest producer of biogas in Europe, after Germany,” Gattoni said.

Biogas is typically only 60% methane and contains additionally too much corrosive hydrogen sulphide for conventional applications that have not been retrofitted. However, the potential for converting it into biomethane for other destinations, such as transport, is huge, partly owing larger size of its biogas plants compared Germany’s, he said.

However, before this new legislation, there were only seven experimental biomethane plants in the country, of which only one is operational, owing to the high production costs and the uncertain regulatory framework. Nevertheless, some 600 projects have submitted application to grid operator Snam in order to be connected to the national gas grid, with construction of 20 projects already underway.

The shift is also viewed favourably by the electricity sector, despite biogas resources looking set to be redirected towards biomethane upgrading and transport use.

“The two sectors are not in competition,” said Cosetta Vigano, of Italian electricity association Elettricita’ Futura, formed in 2017 by the merger of Assoelettrica and Assorinnovabili.

The biogas sector “has pushed a lot on the electricity side in the past years,” thanks to remunerative incentive schemes to renewable resources for electricity generation, she said. As a result, biogas use for generation has seen “a good development” so far.

However, as these subsidies are progressively expiring, biogas producers are looking with interest at the possibility of upgrading plants for biomethane production, Vigano explained, adding the biogas sector is also awaiting new renewable incentive schemes but that resources destined to biogas for power generation are expected to be “very low.”

Biomethane sector looks at CNG, LNG-fuelled vehicles potential 

Meanwhile, with more biomethane production projects coming on stream in the coming years, the market is also looking at the potential represented by the LNG and CNG-fuelled vehicle market, Gattoni said.

CNG-fuelled vehicles alone were using some 1bn m³/year of gas in 2015, which was set to rise to 4bn m³/year in 2025, according to Snam data.

Biomethane’s “added value is that it is an innovative fuel” that can be utilised on a “mature technology” already in place, Michele Ziosi, responsible for institutional relations at CNH Industrial, told NGW. CNH, through its subsidiary Iveco, manufactures LNG- and CNG-fuelled commercial vehicles that are already compatible with bio-LNG and bio-CNG, he explained.

Bio-CNG and bio-LNG fuelled vehicles might reduce greenhouse gas emission by 85-90% compared with traditional fuels, and PM10 and PM2.5 (particulate matter) by 95%, he said.

Moreover, using LNG- and CNG-fuelled vehicles is already leading to savings of 5-15% for users on costs, “depending on the distance,” he added.

Commenting on the subsidy scheme, Ziosi said it will foster “energy self-sufficiency” in the country. Overall, biomethane demand in the transport sector – including bio-LNG and bio-CNG – has the potential to rise from current 1.5mn Gcal to 4.7mn Gcal through 2020 in Italy, in line with Italy’s energy strategy, he said.

Meanwhile, at a European level CIB is campaigning for biomethane to take a central role in the “energy transition” together with other renewable sources, and in line with the Paris Agreement’s objectives of 100% of energy from renewable sources by 2050, with biomethane demand potentially rising up to 100bn m³/year, Gattoni said.