The Development of Biomethane Production and Other Measures in Transition to Greener Gas

On 10 November 2021 the Law of Ukraine "On amending of some laws of Ukraine concerning the development of biomethane production" (the "Law") was officially published and became effective.

The Law sets only a framework and delegates specific procedures, such as grounds for issue and annulment of Guarantee of origin and Certificates of origin for biomethane, their transfer, and division to be determined by the executive branch of the government through the regulation on the Biomethane Registry.

Biomethane – is purified biogas, a renewable alternative to natural gas. The Law enables Ukrainian natural methane gas infrastructure for storage, shipment, and metering of renewable gases. The Law enables biomethane producers to connect to gas networks in various parts of the Ukrainian gas transmission or gas distribution system; we note that some biomethane producers already submitted applications for connection to the gas networks prior to the enactment of the Law, according to Pawel Stanczak, Deputy General Director for Development and Transformation of Gas TSO of Ukraine.

Access to gas transmission and gas storage infrastructure

The Law entitles producers of biomethane for access to the gas transmission and gas distribution systems, gas storage, LNG (liquid natural gas) facilities provided physical and chemical characteristics of biomethane meets the standard characteristics.

This enactment simplifies the access of biomethane producers to the national natural gas infrastructure.

Guarantees of Origin for biomethane

Guarantee of origin ('GO') for biomethane is an electronic document issued through the Biomethane Registry. To receive a GO for biomethane each producer on monthly basis submits to the Registry the following information: (1) country of origin of biomethane, (2) volume of biomethane supplied to the gas transmission or gas distribution system, (3) overall volume of biomethane (in MWt-hours) supplied to the gas transmission or gas distribution system, (4) month during which the biomethane is supplied to the gas transmission or gas distribution system, (5) raw materials used for the production of biomethane, and on any agents added for strengthening of the smoke of biomethane. Procedure for the functioning of the Biomethane Registry must be developed by the Cabinet of Ministers of Ukraine by 10 May 2022. The State Agency for Energy Efficiency (the 'Issuing Authority') will administer the Biomethane Register.

Hence, GOs for biomethane will be issued to each biomethane producer, which will become registered in the Biomethane Registry. Such registration of biomethane producers will require successful completion of the independent audit confirming the production capacity.

GOs shall be issued free of charge within 5 days following the lodging of information on the specific producer to the Biomethane Registry. Such provision seems to be unclear given that GOs shall be issued every time the biomethane is shipped through the pipeline, whereas registration of each producer in the Biomethane Registry takes place only once. We expect, therefore, that GOs shall be issued within 5 days following the request by the registered producer. (lodged in the Biomethane Registry). We assume this would be addressed in the Procedure for the functioning of the Biomethane Registry.

GOs shall be transferable and divisible, however, the Law does not elaborate on the specific procedures and authorizes the Cabinet of Ministries of Ukraine to regulate this in the Procedure for the functioning of the Biomethane Registry.

Certificates of origin for biomethane

Certificates of origin ('CO') for biomethane must be issued following the cancellation of the respective amount of GOs for biomethane. However, the Law does not specify grounds for cancellation of GOs for biomethane and instances in which COs could be used. These are open issues to be addressed by the Procedure for the functioning of the Biomethane Registry.

Conversion of Pipeline Gas Metering Units

The respective Draft Law has been enacted by the Ukrainian Parliament on 2 November 2021 once the President signs the Law it will enter into effect (the "Law on gas measure change").

The Law on gas measure change shall ensure that the natural gas quality parameters underlying the pricing at the Ukrainian gas market as one of the preconditions for the integration of the Ukrainian gas market into the gas market of the European Union.

Starting from 1 May 2022, the volume of the natural gas that is accepted/transferred to/from the gas transmission or distribution system, sold or purchased; supplied or consumed, pumped into, or withdrawn from, the storing facilities or LNG facilities, shall be measured in power units – kilowatt-hours.

Decarbonization of Motor Fuels

Earlier this year, the Ukrainian Parliament has approved in the first reading (the date of the second reading has yet to be scheduled) Draft Law 3356-d regarding the minimum share of biofuel (bio components) in the retail transport fuels. In the current version, the Draft Law proposes to add at least 5% of liquid biofuel (bio components), including bioethanol to the automobile gasoline as of 1 May 2022; no further increase is pre-planned.