Understanding and implementing the potential of biomethane within the aluminium sector

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© September 21st 2023


Unzall leads the decarbonisation of the UK and ROI industrial sector; with a focus on implementing biomethane for large gas users operating in the UK and EU. She is adept in structuring the bespoke procurement of biomethane certificates and long-term biomethane offtakes for corporates, providing clients with a transparent picture of the market they are sourcing from. Unzall holds expertise in best practices under environmental standards for procuring biomethane contracts, with insights into market trends and arbitrage opportunities that shape procurement decisions.

The leading R&D Specialist in renewable gas across ACT Commodities group. Zuzana focuses on the carbon accounting of biomethane under standards such as the GHG Protocol, as well as alternative forms of renewable gas such as hydrogen across the EU, UK, and ROI. She is well-versed in environmental legislation like ETS and CBAM and has a granular understanding of how biomethane can be accounted under these legislative schemes. Zuzana oversees updates on changes to the biomethane market and participates in working groups that contribute to these policy changes – such as the working group for the recognition of biomethane under the GHG Protocol.




We have been active in the sustainability market for over twelve years and have created a wealth of knowledge that we use in order to serve our clients globally.

Depending on our client’s needs, products can be combined and placed into tailor-made strategies to meet both compliance requirements and voluntary goals.

Amsterdam Paris New York Shanghai Singapore

Global Renewable Electricity Certificates Biomethane/Renewable Gas Certificates Renewable Hydrogen Certificates

Strategic sourcing & solution discovery Verified carbon offsets

Transactional carbon allowances within the EU ETS and UK ETS

Key market insights

We ensure that we truly understand our clients’ wishes so we can offer them structured solutions that meet their specific needs.

We continuously keep track of market changes and provide our clients visibility to relevant market trends such as demand, supply, and price factors for the renewable electricity and biomethane market.

Minimizing risk in forward markets

Developing high-impact climate action projects

We focus on mitigating uncertainty and minimizing volumetric and price risk by building a tailor-made hedging strategy based on your sustainability goals and regional requirements.

We believe in creating tailor-made solutions for our partners – and this extends to our carbon credit offering.


Renewable Gas There are two routes to market for organisations looking to purchase biomethane.

When a Biomethane GoO and physical gas are traded in the same contract, we refer to this as a bundled GoO contract or green tariff. Grey Gas from a non-renewable sources is coupled with GoOs from a renewable source directly within the supply contract with the end consumer. A common misconception is that green tariffs provide GoOs and gas from the same underlying asset. Only when GoOs are purchased through a Gas Purchase Agreement (GPA) or when explicitly stated by the energy supplier, can the source of the GoO be traced to the same origin as the underlying gas. However, long-term green gas offtakes are still a developing market.

+ A single contract for physical gas & GoOS - Less transparency on characteristics of GoOs (feedstock, vintage, etc.) - High reliance on energy supplier for providing competitive GoO pricing and visibility on market opportunities

When a GoO and physical gas are traded in separatecontracts, we refer to this as an unbundled GoO contract. The end consumer can maintain their physical gas contract with the gas supplier and separately match the contract with an equivalent number of GoOs from a third-party.

- Two separate contractual entities for the physical gas & GoOs + More transparency on the characteristics of GoOs for reporting emission reductions in accordance with CDP/SBTi/RE100, as well as market factors/ arbitrage in the relevant sourcing country. + Access to all GoO market sellers to ensure competitiveness of pricing



Plant byproducts

Animal byproducts Biowaste from households

Biofuel for transport

Industrial & commercial organic waste Energy crops

Certificate

generated Biomethane


Biomethane is a more sustainable energy source than natural gas, but its exact carbon intensity and lifecycle are dictated by the type of feedstocks used to create it. This is due to the nature of how different feedstocks are produced.

of German biomethane comes from

For example, biomethane produced from feedstock created with 100% waste is truly a “circular” product with zero or negative carbon intensity.

At the same time, biomethane produced from feedstock created with crops specifically grown for energy production can have less of a positive environmental impact.

of French biomethane comes from

of UK RGGOs come from



Scope 1

Biomethane Your Scope 1 emissions explained in accordance with the leading G H G Protocol corporate standard.

DID YOU KNOW?

If you are a business that consumes high fuel levels due to operations, the main contributor to your scope 1 emissions stems from the amount of fuel you consume and its CO2 intensity. Biomethane can be used as a renewable alternative and direct replacement for fossil-based natural gas to reduce scope 1 emissions.

Spot Purchasing Production Offtakes

Scope 1 Direct emissions This includes all emissions coming from sources that an organization owns or controls.

Spot Purchasing

Reducing your emissions with biomethane Emissions Reporting-C D P

Sources: Intergovernmental Panel on Climate Change; ACT internal biomethane carbon intensity data

BIOMETHANE

Gas consumption in facilities, fuel consumed by companyowned vehicles and emissions from manufacturing processes. 6

NATURAL GAS

“When gas is sourced from a including both renewable and non-renewable sources, certificates are required to demonstrate the renewable origin of gas.” “If the company uses biogas that is sourced from a dedicated pipeline and the source is renewable, then they do not need certificates to prove the renewable origin”.

-CDP Climate Change Questionnaire 2022, C6.1 Scope 1 EmissionsData Comply with the following standards:


Understand Your Emissions | A Deep Dive Into Direct Emissions | Scope 1

The amount of direct emissions an organization generates can vary significantly

Organizations in the industrial sector — such as energy, and material production — generate more direct emissions than other organizations. For an Aluminum organization, the majority of emissions can be attributed to the aluminum electrolysis, approximately 77%. While the smelting process consumes a significant amount of natural gas.

An organization can significantly cut its direct emissions by switching from natural gas to its zero-carbon intensity replacement, Biomethane (EU)/Renewable Natural Gas (US).

Direct Emissions Scope 1

The TOTAL annual direct emissions for organizations in the steel and aluminum sector compared to all other sectors.

n= 24

A Practical Example During the smelting process an aluminum organisations consume approximately 13 MWh of natural gas per ton of aluminium. In 2022, 149,000 tonnes were produced in the UK, resulting in approximately 1,937,000 million MWh/year of gridconnected natural gas to produce this aluminium in facilities. This is an example of stationary combustion of fossil fuels resulting in Direct Emissions (Scope 1). By transitioning to 100% waste and residues derived Biomethane (EU)/Renewable Natural gas (US), the aluminium producers can eliminate their natural gas-related direct or Scope 1 emissions entirely.

n= 24

n= 5006

Fuel Type

-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

Direct Emissions (Scope 1): direct emissions come from sources that your organization owns or controls, and the vast majority come from the combustion of fossil fuels, like stationary combustion from an industrial process or mobile combustion from vehicles.

Natural Gas

Biomethane

EU Grid

100% Waste & Residues

Carbon Intensity

0.2 tCO2e/MWh

0.0 tCO2e/MWh

x

x

Annual Consumption

1,.937.000 MWh

1,.937.000 MWh

=

=

388.000 tCO2e

0 tCO2e

Direct Emissions



UK & EU ETS

EU CSRD

CBAM

Emissions

Product categories

CO2 PFCs N2O When does the obligation arise?

Timeline 2023

2026

2034


European Biomethane Market Focus

Biomethane is widely used to meet ETS requirements in Germany, France the Netherlands and is expanding into other EU markets. For example, a significant portion of RGGOs are often transferred to DENA (the German Biogas Registry) for use in Germany’s biomethane for EU-ETS compliance scheme.

1

Gas interconnection pipeline

2



Market Focus

INDUSTRIAL USE

Digest of UK Energy Statistics, 2021

C HE M I C A L S

POWER & ENERGY

FOOD & BEVERAGE

MINERAL P R OD U C T S

A L L OT HE R I N D U S T R I E S There are many other industries in the UK that make up about half of all industrial gas use, such as, various forms of manufacturing, iron & steel production, paper & printing, textile production and many more.

OTHER UK Chemical producer Johnson Matthey has identified “natural gas replacement” as one of their “five principles for net zero” and they specifically call out conversion to biomethane.

GENERAL PUBLIC The Food & Drink Federation has created an ambitious decarbonization target for food production that nearly entirely replaces natural gas with biogas by 2030.

Pilkington United Kingdom Limited, part of the NSG Group, created the world’s lowest emissions float glass by producing a batch with biomethane instead of natural gas through their standard production method. Note: Industry action examples are from publicly available news releases and trade publications and used to indicate an emerging trend. ACT is not expressing or implying any relationship with these organizations.


Total RGGO Consumption 110% Growth Data sources: GGCS Market Update October 2022, BMCS Data

of RGGOs have already been retired through Q2 2023. The market is on pace to exceed 2022 demand by the end of the year. Industrial/Commercial Use 130% Growth

The United Kingdom is front-runner voluntary corporate climate pledges. This has resulted in a substantial increase in biomethane use from industrial/commercial end users as these organizations look for low-emission alternatives to natural gas.

Domestic Consumption Flat

Domestic consumption (household end-use) of RGGOs has remained relatively flat over the last 3 years.

Exports

270% Growth The huge spike in demand can be directly attributed to a substantial increase in exports to Europe. This is primarily driven a significant increase in transfers to DENA (German Biogas Registry) for EU-ETS compliance and an increase in demand for non-Russian gas (of any type) throughout the EU.

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European Biomethane Market Focus

The United Kingdom has the 3rd most biomethane facilities in Europe. The overwhelming majority of biomethane in the UK is used for energy production.

Market Size is based on full-year 2020 data from the European Biogas Association. EBA Statistical Report 2021

Significant government support to increase biomethane production.

As of 30 November 2021, The UK government introduced the Green Gas Support Scheme (GGSS) to provide financial incentives for new anaerobic digestion biomethane plants to increase the proportion of biomethane in the gas grid. New biomethane plants built over the next four years, will receive quarterly payments over a period of 15 years based on the amount of eligible biomethane injected into the gas grid. Additionally, The Green Gas Levy (GGL) places obligations on licensed gas suppliers, including a requirement to make quarterly levy payments, in order to fund the GGSS.



Quantity of Certified BM Purchased

EUAs Obligations Reduced

200,000 MWh

33057 Tonnes

Total Saving on Biomethane Purchase: EUROs 2,842,902 Scope 1 target Achieved for next 2 years

ACT sources biomethane from across Europe

Purchase certificates from ACT

ACT mass balances volumes on the German registry

Update monitoring plan submitted to the German Emissions Trading Authority (DEHSt) (e.g. via recommended consultant)

German biomethane registry (DENA) registers the volumes

ACT delivers biomethane certificates that are already in the registry

Every February, the verifier confirms the biomethane use and emission reduction

With biomethane certificates, you to buy less EUAs

August 2022


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