Gas on the TTF: highest close in history on 26 August 2022

At the end of August 2022 the European gas market reached a historic peak: on 26 August the contract on the Dutch TTF hub (traded on the ICE Endex exchange) closed above 330 euro per MWh, many times the average of the years before the crisis. It was driven by limited supplies from Russia via the Nord Stream 1 pipeline, the race to fill storage before winter and fears about the stability of supply. For the biogas industry this is both an opportunity and a problem.

What is changing

Natural gas is a universal fuel: it powers power plants, heating plants, the chemical industry and millions of households. When the exchange price rises more than tenfold, heat and energy bills rise, and energy-intensive companies cut production. The fertiliser industry is particularly affected: gas is the feedstock for producing ammonia and nitrogen fertilisers, so their prices rose sharply, and some producers in Europe shut down plants.

High prices do, however, make it easier for renewable gases to compete. The cost of producing biomethane depends on feedstocks and plant scale, and is usually only indirectly linked to gas quotations; the higher the market price, the faster an investment pays back, and local sources become attractive to industrial customers.

Significance for the industry in Poland

For Polish farms and biogas plants the situation has several dimensions:

• digestate as a fertiliser becomes much more attractive relative to mineral fertilisers,
• the costs of building installations are rising because of inflation and increasingly expensive materials,
• electricity prices affect the revenues of biogas plants selling energy on the market,
• public support for gas customers (frozen tariffs) does not extend to gas producers.

For plants that could switch from cogeneration to biomethane, a higher gas price improves the economics, but the legal framework and grid access remain the key issues. Until the rules on biomethane are adopted, the market remains in the preparation phase.

How the market reacted

Gas prices fed through to electricity prices, because in many markets it is gas-fired power plants that set the marginal price. As a result, producers of energy from other sources, including biogas plants, could sell energy at higher prices, provided their contracts did not cap prices. In Poland, however, a significant part of production is covered by support schemes with fixed parameters, which reduce both the risk and the potential gains. Assessing the impact of the crisis on specific projects therefore requires taking into account the type of contract and support system.

What next

Gas prices will be influenced by the level of storage filling, winter weather and further decisions by Russia. The EU is considering price-limiting mechanisms and joint gas purchasing. For biogas producers, securing revenue over the long term matters more than short-term valuation: through contracts with customers and support systems that will provide stability regardless of market fluctuations.