The strategy will see MAPFRE establish 20 to 25 plants across Spain, which will utilise waste produced by the country’s agricultural sector. The waste will be turned into gas that can be injected directly into the natural gas grid or used to generate electricity.
Spain has been slow to embrace biomethane as a fuel source, CIO José Luis Jiménez told New Private Markets, and is therefore ripe for investment.
“In Europe, there are around 1800 plants. In Spain, last year, we had five,” he said.
Jiménez also hopes the project can play a role in boosting European energy security. He said: “One of the main weaknesses in Europe is natural gas, and especially after the war in Ukraine… it is so high, our dependence on Russian gas, that we have to do something to be more autonomous.”
MAPFRE is launching the fund in conjunction with Abante, a Spanish asset manager with which the insurer has a strategic partnership, and energy sector specialists IAM Carbonzero. The plan is to raise up to €100 million for the strategy, per the release. So far, MAPFRE has committed €10 million, with the sum likely to “grow as long as the fund grows”, according to Jiménez. Institutional investors and private banks will also be offered the chance to participate.
The strategy will yield 12 percent returns “if things go according to plan”, Jiménez added, but the hope is that returns reach 20 percent or more.
Whether biofuels can truly be considered a green energy source is also up for debate, in part due to fears that its proliferation could incentivise the production of waste. Such concerns led to NGO The World Wildlife Fund for Nature to conclude that, while biogas is a more sustainable fuel source than traditional natural gas, it should ultimately be considered a transition fuel as the planet moves towards decarbonising its energy production. While making use of methane is preferable to it escaping to the atmosphere, burning the gas still has a negative climate impact.
For his part, Jiménez is clear in his view that biomethane is the right place to invest.
“There is no downside to this kind of renewable energy. I would say it is the perfect energy,” he said, pointing to the amount of waste produced as a part of the agriculture industry, and methane being a more potent greenhouse gas than CO2. At the moment, farmers are left with two options: “to transform this, which is expensive, or to hide this.” As a result, agricultural waste often enters water supplies, leading to further pollution.
Biofuels have so far proved a difficult area for impact fund managers to navigate. Biomass-fuelled energy plants “are not economically viable on their own”, Earth Capital investment lead Avent Bezuidenhoudt told NPM last year, causing the firm to merge four such assets in its portfolio in pursuit of profitability.