The importance of governmental incentives for small biomethane plants in South Spain

A novel analysis addresses the economic viability of biomethane production from small biogas plants in South Spain, as a claim to promote the use of green energy and reduce the consumption of natural gas. To this end, the importance of governmental incentives to reach profitability in biomethane plants is illustrated through a case study. To date, no study addressing this problem specifically for South Spain can be found. The study considers the whole process from biogas production to biomethane feeding into the grid, for three different biomethane capacities (50, 100 and 150 m3/h) and includes an exhaustive sensitivity analysis. For the three cases, implementing a biomethane plant is not viable and, therefore, not attractive for investors. Results considering biomethane governmental incentives as feed-in premia show significant improvements on the profitability of the largest plants. For example, supporting 150 m3/h biomethane production capacity plants with a premium price of only 6 €/MWh (6.6 cents/m3) results in 270 k€ NPV. Nevertheless, the smallest biomethane plants are hardly feasible. Concerning governmental support through investment subsidies, 150 m3/h plants are profitable if 10% of the investment is subsidized, whereas the smallest plants do not reach profitability even if 50% of the investment is subsidized. •A novel analysis for biomethane production in South-Spain are addressed.•The importance of governmental incentives is pointed out to reach profitability.•Incentives as feed-in tariffs showed significant outcomes for high capacity plants.•The smallest biomethane capacity plants were proved to be arduously feasible.