ITALY - BPA Contracts with Final Consumers: An Additional Revenue Source

ITALY – BPA Contracts with Final Consumers: An Additional Revenue Source

Tuesday, May 27, 2025

By Sofia Ubaldini

With the publication of the new Operating Rules (Regole applicative DM 15-9-2022_2025.pdf) under the 2022 Biomethane Decree, the GSE has outlined in detail the contractual structure between biomethane producers and industrial players classified as Hard-to-Abate. This structure was introduced through Article 5-bis of the Agriculture Decree (DECRETO-LEGGE 15 maggio 2024, n. 63) and paves the way for Biomethane Purchase Agreements (BPAs), unlocking new economic prospects for both buyers and producers of biomethane.

Biomethane and Contracts with Final Customers: Understanding the GSE Framework

Before assessing the potential of the new rules and the opportunities they may bring, it is important to understand the contractual framework proposed by the GSE, that we have summarized in the following table:

Economic Benefits for Final Customers: Consuming Biomethane at the Price of Natural Gas

One of the most significant changes introduced by Article 5-bis and incorporated into the new Operating Rules concerns the economic benefits for Hard-to-Abate Final Customers. Thanks to the self-consumption configuration, these customers can avoid the payment to emission-related taxes, namely the EU Carbon Allowances (EUA), at zero cost. Indeed, under the new rules, biomethane GO must be transferred to them at 0 €/MWh.

The following graph illustrates the potential savings for an industrial player purchasing biomethane under a self-consumption BPA according to the contract duration. As it can be easily seen, the benefit is closely tied to the carbon intensity of the biomethane. The higher the CO₂ emissions avoided compared to the fossil fuel benchmark, the lower the fiscal burden for the Final Customer.

Moreover, the longer the contract duration, the greater the expected savings, particularly given that EUA prices are projected to rise as starting from 2027 the ETS system is set to expand to additional sectors.

In a long-term scenario, with biomethane avoiding 100% of natural gas emissions and a contract duration of 15 years, total savings can reach up to 20 €/MWh.

Premium Structure and Economic Returns for the Producer

Since the Producer is the enabler of the Final Customer saving, it is reasonable that this economic benefit is shared between the two parties. As a result, most BPAs include a spread to be factored into the plant’s financial model on top of the incentive granted by the GSE. The point of discussion is on the structure and the value of such premium, that depend on several factors such as the quality of biomethane, the presence of circular add-ons (e.g. composting and CCS), the ability to secure grid connection, the credit rating of the buyer and many others.

The spread can be structured in two main ways. The first option is a variable spread, most often indexed to the EUA price, with a typical range of 40% to 60% of its value. Based on current market conditions and our experience, for a 15-year contract, the spread typically ranges between 8 and 12 €/MWh.

Alternatively, a fixed spread can be agreed upon during contract negotiations, remaining unchanged for the entire duration of the agreement. This is built on expectations of future EUA market trends. Again, based on today’s market and our experience, for a 15-year contract, this spread generally falls between 6 and 9 €/MWh.

When the contract is executed through an Intermediary, it is important to consider that part of the spread may be retained by this third party, potentially reducing the Producer’s net margin.

If you are interested in learning more about this topic, don’t hesitate to get in touch with our Italian team. Our New Energy is a European leader in energy market advisory, founded in Denmark with the mission to accelerate the energy transition through smart, market-based solutions. Since 2017, we have supported energy producers across Europe, successfully closing over 5 GW of market parity PPAs and all kinds of renewable projects, from utility-scale solar and wind to BESS and biogas assets.

In the biomethane sector, we have long-standing experience in Northern Europe and, building on that expertise, we are now actively supporting the first transactions in the Italian market. With our cross-border know-how and hands-on approach, ONE is your trusted partner to navigate the complexities of the BPA market and unlock long-term value.