Economic Feasibility of Feed-in Tariff (FiT) for Biomethane Injection into Natural Gas Distribution Grid

Abstract

Feed-in Tariff (FiT) is a policy mechanism designed to promote investment in renewable energy technologies. Despite the successful implementation of FiT mechanism for renewable electricity generation in Malaysia since 2011, FiT for renewable gas, biomethane injection into the natural gas grid remains unexplored. This study aims to identify the financial feasibility of biomethane injection into natural gas grid by proposing FiT rate. Net Present Value (NPV) approach is used to calculate the FiT rate for the first five years of biomethane injection into natural gas distribution grid (NGDG), under 8 % degression rate. Preliminary results identified that FiT rate of 40.81 to 227.85 MYR/GJ for biomethane production plants within 1,000 m from the injection point at 4 different sizes: 250 m3/h, 500 m3/h, 750 m3/h and 1,000 m3/h. Biggest plant size (1,000 m3/h) shows lowest FiT rate (40.81 MYR/GJ), although the FiT rate is almost double the piped gas price, 28.85 MYR/GJ. Judging from the trend of increasing piped gas price, along with government subsidy rationalisation plan, it is foreseen that biomethane, under proper policy regulations and FiT mechanism, can be a competitive renewable gas as natural gas. Recommendations are discussed and provided for successful implementation of biomethane injection into the grid.