Following the adoption of the latest revision of the Renewable Energy Directive (RED III), the European Commission is ramping up its work on a critical tool for the renewable fuels industries: The Union Database (UDB).
Giulia Laura Cancian is the Secretary-General of the European Biogas Association.
Anthony Lorin is Senior Policy Analyst at the European Biogas Association.
This IT system is intended to build trust in the market. How? By tracing the sustainability and the origin of the renewable fuels placed on it. This will facilitate the creation of an EU single market for renewable fuels, such as biomethane, and increase its corporate use.
However, a major issue came up in recent discussions: traders will not be able to register sustainable biomethane from outside the EU gas grid into the UDB. In other words, sustainable biomethane flows from neighbouring countries which are physically connected to the same grid – namely UK and Ukraine- would not be allowed into the EU. This raised serious concerns among the biomethane industry.
Announced by the RED II in 2018, the UDB is a tool in the making, originally aimed at addressing the risk of fraud and double counting in the production and trade of biofuels. Biofuels placed on the EU market – and by extension sustainable biomethane used in transport – are to be traced with their sustainability features.
The goal is two-fold: first, demonstrate that accredited biofuels meet RED’s sustainability requirements and are therefore compliant with decarbonisation policy; and second, ensure each volume is claimed for consumption only once. This is critical to prevent fraud at the production process, but also in the trade with fuel suppliers, which are under increasing obligation of a renewable energy share in their supply mix – not to mention double-counting in national statistics.
The Renewable Energy Directive recent revision (RED III) extends the scope of the UDB to all renewable gaseous fuels and recycled carbon fuels which comply with the law’s sustainability criteria, whatever their end-use: transport or else. When it comes to biomethane, this means that all volumes claimed as “sustainable” and injected into the EU interconnected gas grid will have to be registered in this database. The UDB will be the compulsory IT entry gate for such biomethane, meaning the vast majority of the market. It thus become much relevant for both compliance markets (such as the EU ETS or quota-regulated transport markets) and the voluntary market.
The UDB for the gaseous fuels value chain is expected by 21 November 2024, i.e., the legal deadline in the RED III. To reach this objective, the European Commission set up in October 2023 a new process involving the industry stakeholders and national authorities. This process is very much welcome as it creates more dialogue and transparency, and eventually reassures market players on the direction of travel.
However, unofficial sources stated that the UDB for gaseous fuels – and therefore the grid-injected sustainable biomethane market – will be restricted to EU-produced biomethane when it goes live in the 3rd quarter of this year.
This would mean leaving out biomethane from grid-connected neighbours, such as the United Kingdom and Ukraine. In the first case, this would stop the long-running cross-border transfer of biomethane between the UK and the EU. A major trade disruption for the growing European biomethane market. Moreover, it will limit companies’ access to fully certified biomethane, consequently slowing decarbonisation and efforts to enhance energy security.
In the case of Ukraine, such exclusion of imports would weaken the prospect of its emerging national biomethane market. By end of 2025, 12 production plants are expected to be running. Exports to the EU are essential to them because this is where increasing biomethane volumes are sought for and rewarded to achieve energy and climate targets.
The import of Ukrainian volumes would bring money into Ukraine and support the development of their technology manufacturing capacity. In an article dated 5 January 2024, Georgii Geletukha, Chairman of the Board of the Bioenergy Association of Ukraine, recently rang the alarm about this issue, noting that “during the construction of the biomethane plant, at least 50% of the investment will be invested in Ukrainian equipment and services”.
Excluding them would also go against the Memorandum of Understanding signed in February 2023 by Ursula von der Leyen and the Ukrainian Prime Minister, Denys Shmyhal. The Commission by this MoU committed to “harmonise certification processes (…) for importing biogas, biomethane, hydrogen and other synthetic gases“; as well integrate “economic operators from Ukraine into the EU-recognised global certification system” to enable biomethane “from Ukraine to access the EU energy market“.
According to unofficial information, the UDB would integrate the UK and Ukraine very soon after the official launch of the database. Yet, there is no official Commission’s document confirming this and the market is still unsettled by such business uncertainty. The development timeline of the Union Database has been very irregular in the past 3 years, and this creates fears that the linkage with UK and Ukraine may not be made according to the informal announcement.
In any case, this course of action would create a detrimental stop-and-go effect – trade agreements and prospects would be disrupted for a few months, and then could be resumed lawfully. Overall, it would send a very negative signal to investors about the emerging biomethane industry aiming to grow ten-fold by 2030.