TotalEnergies’ Biogas Divestment: A Strategic Shift or Undervalued Opportunity in Renewable Energy?

The energy transition is not just a shift in fuel sources—it’s a seismic reallocation of capital, talent, and investor focus. TotalEnergies’ recent decision to explore selling stakes in its European biogas assets has sparked debate: Is this a tactical move to prioritize higher-growth renewables, or a missed opportunity in a sector poised for regulatory tailwinds? For investors, the question is clear: Should you “buy the dip” in biogas, or chase Total’s new strategic bets?

The Strategic Shift: Why TotalEnergies is Redirecting Capital

TotalEnergies’ 2025 priorities are clear: pivot toward low-carbon energy while shedding underperforming assets. The company’s Downstream segment—encompassing refining and petrochemicals—posted a 69% year-on-year decline in adjusted net operating income in Q1 2025, with refineries like Donges and Port Arthur grappling with operational hiccups. Meanwhile, its Integrated Power division, focused on renewables and storage, is booming. In 2024, TotalEnergies invested $4 billion in renewables, a figure set to grow as it targets 50% of CAPEX for low-carbon projects by 2025.

The biogas divestment aligns with this strategy. By exiting underperforming assets, TotalEnergies can redirect capital to high-growth sectors like green hydrogen (e.g., its 30,000-ton/year electrolyzer in Zeeland) and offshore wind (e.g., Taiwan’s Yunlin project). This is no small move: the company’s gearing ratio rose to 14.3% in Q1 2025, signaling a need to optimize its balance sheet.

Biogas: A Stable, Undervalued Renewable Asset?

Biogas, often overlooked in the hype around solar and wind, remains a cornerstone of Europe’s energy transition. The EU’s REPowerEU plan aims for 42% renewable energy by 2030, with biogas playing a critical role in decarbonizing heating and transport. Regulatory tailwinds include:
- Carbon Pricing: The EU Emissions Trading System (ETS) now prices carbon at over €85/ton, making biogas—a carbon-neutral fuel—economically attractive.
- Subsidies: Member states like Germany and France offer feed-in tariffs and grants for biogas projects, reducing risk for investors.

Valuation multiples further suggest a discount opportunity. Biogas assets typically trade at 8–12x EBITDA, compared to 15–20x for solar or wind portfolios. For instance, Sembcorp Industries’ biogas assets (a comparable play) yield a 9.5% dividend yield, outperforming broader energy indices.

Risk vs. Reward: Is Biogas Overlooked or Overvalued?

The risks are real. Biogas faces competition from cheaper natural gas and scalability challenges due to feedstock logistics. However, the stability of cash flows—biogas projects often have 15–20-year PPA contracts—offsets these concerns. Meanwhile, hyped sectors like green hydrogen face scalability hurdles and price volatility.

Conclusion: A “Buy the Dip” Moment for Biogas?

Thesis: TotalEnergies’ biogas divestment presents a compelling entry point for investors seeking stable, low-carbon exposure. Regulatory support, undemanding valuations, and contractual cash flows make biogas a safer bet than speculative plays like green hydrogen.

Action Items:
1. Acquire biogas assets at discounted multiples, leveraging EU subsidies and long-term PPAs.
2. Monitor TotalEnergies’ CAPEX allocation—if green hydrogen/wind projects underdeliver, capital reallocated to biogas could follow.
3. Avoid overpaying: Stick to assets with proven feedstock sources and inflation-linked PPAs.

The energy transition is a marathon, not a sprint. While TotalEnergies bets on the next big thing, its biogas assets—now sidelined—could be the unsung heroes of Europe’s renewable future. The question isn’t whether to pivot, but whether to pivot wisely.

Final Call: Biogas may lack the buzz of hydrogen, but in a world hungry for stability, it’s the quiet play with the loudest upside.