Europe’s biomethane market finds itself at a fascinating yet complex stage of development. Investor confidence and financial commitments are at record levels, yet the sector is simultaneously grappling with structural and regulatory challenges that are beginning to slow physical growth. This paradox defines the current landscape: an industry on the brink of rapid expansion, but at a critical juncture where policy, finance, and technology must align to sustain momentum.

Market Growth and Shifting Leadership

In the past three months, the market’s foundations have continued to strengthen. By the end of Q1 2025, installed production capacity across the continent had reached an annual rate of 7 billion cubic metres (bcm), reflecting a 9% increase year on year. The number of operational biomethane plants also rose from 1,548 to 1,678 by June 2025, with a net gain of 165 new facilities in just twelve months. This growth builds on over a decade of steady expansion. In 2023, combined biogas and biomethane production amounted to 22 bcm, covering 7% of the EU’s fossil gas consumption that year, underscoring the growing role of renewable gases in Europe’s energy mix.

A defining shift has been the change in geographical leadership. For the first time, France has overtaken Germany as Europe’s largest biomethane producer, with a 21% higher production share and three times as many operational plants. This is not merely a change in ranking, but the result of starkly contrasting national strategies. France, characterised by a high number of smaller installations, has benefitted from a stable policy environment and guaranteed purchase tariffs. Germany, by contrast, has seen its long-standing dominance weaken under the weight of regulatory uncertainty, stalling its once-mature market. The lesson for Europe is clear: consistency and predictability in national strategy are more valuable than legacy market leadership when that market is in flux.

Financial Strength and Investment Patterns

Financially, the sector remains robust. Total planned investment has risen to €28 billion, an increase of €1 billion compared with the previous year. Of this, €24.2 billion is allocated to new, “greenfield” projects, highlighting investor appetite for scaling up productive capacity from scratch. The largest planned investments are in Spain (€4.8 billion) and Denmark (€3.14 billion), indicating where investors see the strongest opportunities. These commitments reflect confidence in the sector’s long-term potential.

Biomethane’s Expanding Role

Biomethane is more than just a renewable energy source: it is a strategic “drop-in” substitute for fossil methane, chemically identical and fully compatible with existing gas infrastructure. This makes it a vital tool for decarbonisation and energy security, particularly as Europe seeks to cut its dependency on imported natural gas, which stood at 97% in 2022.

The industry is also positioning itself as a cornerstone of the circular bioeconomy. Feedstock use is shifting away from energy crops towards sustainable, waste-based inputs such as agricultural residues, manure, and organic waste. This not only meets stricter sustainability criteria but also generates valuable by-products: nutrient-rich digestate that can replace synthetic fertilisers, and biogenic carbon dioxide (CO₂), which can be captured for use in the food and beverage sector. By 2027, biomethane is expected to become Europe’s leading source of captured bio-CO₂, with the technical potential to capture up to 89 million tonnes annually by 2040—making a significant contribution to the EU’s climate neutrality goals.

From Policy to Practice: The Rise of Commercial Biomethane

While the foundations are in place, scaling up to meet ambitious targets will depend on a number of critical enablers.

Long-term Biomethane Offtake Agreements are emerging as a cornerstone of growth, providing developers with the certainty required to secure financing. These contracts, which lock in price and volume over extended periods, complement traditional policy support by reducing risk.

A prominent example is the seven-year agreement between chemical giant BASF and energy company ENGIE, which will supply BASF with up to 3.0 TWh of biomethane to replace fossil feedstocks at sites in Germany and Belgium. Another landmark deal saw Swedish tanker operator Furetank secure sufficient biomethane from commodity trader Cargill to fuel its entire European fleet in 2025. Such large-scale agreements signal biomethane’s increasing commercial maturity and integration into core industrial and transport sectors.

Barriers and Bottlenecks

Despite positive momentum, the market faces persistent headwinds. The EU’s REPowerEU plan targets 35 bcm of biomethane production by 2030, yet national projections currently fall short by 3–5 bcm. This gap stems largely from fragmentation. Although Guarantees of Origin (GOs) and Proofs of Sustainability (PoS) have been introduced to certify biomethane, inconsistent national implementation has produced a “patchwork” of approaches. This lack of harmonisation complicates cross-border trade, drives up administrative costs, and creates uncertainty that can dampen investment. A unified certification framework is urgently needed to enable the sector to operate as a cohesive, continent-wide market.

Infrastructure constraints present another obstacle. Developers cite protracted and opaque permitting processes, limited injection points into the gas grid, and shortages of skilled labour. Poland’s recent introduction of a 20-year Contract for Difference (CfD) for large plants demonstrates how national policy can provide the certainty needed to overcome these hurdles and attract investment.

A Holistic Value Proposition

The future of biomethane lies not just in its energy output, but in its ability to reinforce the circular economy. Shifting feedstocks to residues and waste reduces land-use conflicts while addressing waste management sustainably. By-products such as digestate and biogenic CO₂ create additional revenue streams, improving resilience and diversifying the industry’s economic base. In this way, biomethane embodies a holistic model: converting waste into renewable energy, capturing carbon, and producing sustainable fertilisers.

How AFS Energy Can Help

Navigating the European biomethane market requires specialist expertise, from managing fragmented national policies to structuring innovative long-term contracts. AFS Energy is uniquely positioned to support businesses in this evolving sector.

We offer:

• Market intelligence and advisory services to identify the most competitive opportunities.
• Support in structuring Biomethane Offtake Agreements to de-risk projects and secure financing.
• Guidance on certification schemes such as Guarantees of Origin and Proofs of Sustainability.
• Comprehensive strategic support for both developers and corporate buyers aiming to meet decarbonisation targets.

Whether you are a project developer seeking to de-risk a new facility, or a corporate buyer striving to build a resilient and sustainable procurement strategy, AFS Energy is your strategic partner in unlocking the full potential of biomethane.