Why Goldman Sachs went for biomethane instead of hydrogen

The Spanish renewable party underwent a revolution after Goldman Sachs announced a fresh commitment to advance in the energy transition.

The business bank has established Verdalia Bioenergy, a new fund with 1,000 million euros in the capital that will only be used for the purchase, development, and asset management of biomethane, one of the renewable gases that aim to become the leading natural gas substitute.

With more than 2,000 million euros in assets under management, the Wall Street juggernaut has delivered a warning to the market along with the release of its energy plan. According to Matteo Botto, general director of infrastructure at the business bank, “we think that biomethane is one of the most alluring segments of the energy transition for investors.” In contrast to other decarbonization options, including green hydrogen, which seem to be piquing investors’ interest more, Goldman Sachs is thus positioning biomethane as the best option.

A renewable gas known as biomethane is produced from biological waste, including sewage sludge, manure, slurry, and agricultural waste. Spain has the potential to become the hub of the European biomethane network because of its extensive agricultural and cattle industries, which have already made it a dump for the continent. It’s no accident that Goldman Sachs launched Verdalia’s operations in Spain by purchasing its initial portfolio of projects that have the potential to generate 150 GWh annually (gigawatt hours per year).

According to a recent assessment by the gas employer Sedigás, Spain has more than 2,300 plants that can be converted for the production of biomethane, a process that would require an expenditure of approximately 40,500 million euros. By 2030, Europe wants to produce this clean fuel at a rate of 35,000 million cubic meters per year (bcm/year). Spain is expected to contribute between 12 and 13%.

The way to the deployment of renewable hydrogen is less apparent than the path to the expansion of biomethane, which is already starting to be discussed in financial rumors, where the term “bubble” is being used more and more often when referring to this second green gas.

Although the European Commission has said that the first auction for 800 million worth of hydrogen purchases will begin in the fall of next year, there are concerns about the proposal. The reason is that there is currently no legal framework that will specify what hydrogen can be termed renewable based on its source (nuclear, solar, gas, wind, etc.), as well as the standards for its certification.

According to socialist MEP Nicolás González, a member of the Energy and Industry Committee, “the delegated act is stalled in the Presidency Cabinet of the European Commission,” in conversations with EL MUNDO. He claims that “this lack of definition is driving investment in hydrogen to the US.”

The rush by Europe to replace Russian oil and gas supplies has increased investor interest in alternative fuels and sparked a push to adopt the most promising of all the possibilities now being researched. In the case of hydrogen, a significant subsidy package has been the driving force behind this greed. The Perte of renewable energy in Spain received 6,900 million euros.

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