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France Criticized for Inadequate Measures to Support Renewable Gas

France Criticized for Inadequate Measures to Support Renewable Gas

(Bloomberg) -- A French plan to subsidize renewable-gas projects doesn’t go far enough to support the nascent industry, according to leading producers.

France last week raised the amount of subsidies earmarked for biomethane plants over the next eight years by 1.8 billion euros ($2 billion) to 9.7 billion euros. But it’s caught between the competing pressures of promoting cleaner energy and keeping costs for taxpayers and consumers under control.

“The government’s signals are mixed,” Laurent Lubrano, chief executive officer of producer Fonroche Biogaz, said in an interview. The latest move is too “shy,” he said.

In subsidizing renewable-gas output by companies such as Fonroche and Engie SA, France is seeking to curb use of natural gas and its associated emissions. But the country, which plans to be carbon-neutral by 2050, has faced pushback from those footing the bill for the shift. In 2018, the government had to scrap a plan to raise taxes on gasoline and diesel as public protests turned violent.

France wants biogas to account for 7% of total gas consumption by 2030, up from 1.4% in 2018. That assumes projects receive feed-in tariffs, or guaranteed payments, of 75 euros a megawatt-hour on average in 2023 and 60 euros in 2028. Current biomethane production costs in France are about 95 euros.

“Engie remains vigilant on the planned trajectories for the price of biomethane, which risk penalizing the industry” at a time when it still has to secure its future, the company said in a statement.

The price compares with the 13.60 euros a megawatt-hour France paid on average last year for natural-gas imports from countries such as Norway and Russia as a global glut sent the market into a tailspin.

Boost to Farmers

Biogas is made from food waste, crop residues and animal manure. Fonroche and Engie, which have outlined plans to invest hundreds of millions of euros in the fuel in coming years, say the government is ignoring the boost they give to farmers by taking such feedstock, as well as producing fertilizers as a by-product of the biogas.

“For the future, we’re waiting to see the precise rules” of the government’s energy strategy, Lubrano said. For now, Fonroche is sticking to its plan to plow a further 100 million euros into biomethane in France by 2023, on top of the 150 million euros it’s already invested, he said.

Closely held Fonroche operates five biomethane plants in France and is due to complete two more this year. The company may sell a minority stake to investors that would help it enter foreign biogas markets or expand into other gases such as hydrogen, according to the CEO.

“We’re already talking with partners, major players in energy and waste, and some funds, sometimes on specific projects,” he said.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Amanda Jordan, Helen Robertson

©2020 Bloomberg L.P.