How to decarbonize the natural gas sector: A dynamic simulation approach for the market development estimation of renewable gas in Germany

The dedicated emission reduction and renewable implementation goals of several countries within the European Union led to the implementation of different support schemes and consequently to market development for biomethane. As the development and market penetration of biomethane as a renewable energy source is in most cases dependent on governmental support (in the form of incentive schemes or support programs) it is highly beneficial to be able to estimate the effects of planned actions. The current framework for biomethane encompasses high uncertainties within the market due to changing legislative conditions. Consequently this research presents a dynamic market model developed that is able to determine the effects of different policies and regulations to producing biomethane capacity, substitution pathways, land use and greenhouse gas emission reduction. It is the first model that encompasses the three sectors power, heat and transport in a dynamic model for biogenic energy carriers exploring the effects of new Government policies. Results indicate that a large proportion of the biomethane used today can no longer be produced economically when the financial support ends after a period of 20 years. Those plants, receiving a comparably high financial support, can only keep on producing and selling biomethane if there are other market opportunities than the CHP market. New instruments like blending could increase the biomethane sale in the direct heating market above the level shown in our results besides other measures like the prohibition of fossil fuels. The transport market would be able to compensate large proportions of the losses from the CHP market under a strong stepwise increment of the price for emission allowances.