POLICY FRAMEWORK SUPPORTING THE DEPLOYMENT OF BIOGAS TECHNOLOGY IN GERMANY Martina Poeschl, University College Dublin, Ireland, Phone: +49 861 9095621; email: [email protected] Shane Ward, University College Dublin, Ireland, Phone: +353 1 716 6105, email: [email protected] Philip Owende, University College Dublin, Institute of Technology Blanchardstown, Ireland, Phone: +353 1 716 7470, email: [email protected]

Overview The European Energy Policy is underpinned by: the need to limit exposure to supply and price volatility of fossil fuels; the need for reduction of greenhouse gas (GHG) emissions by using less, cleaner, and locally produced energy, including the possibility for integration of energy generation with waste management strategies, and; the need to create more competitive energy markets to stimulate innovation technology and jobs. Therefore, there is growing importance of intensified use of biomass among, other renewable energy resources. A key energy policy target in Germany is to increase the share of total energy consumption from renewable resources from the current 9.1%, to 20% by 2020. Biogas has potential applications in electricity generation, heating, and as fuel for the transportation sector. Coupled with less CO2 emission compared to fossil fuels, expanded deployment could provide significant contribution to meeting the outlined targets. Sustainability of future expanded deployment of biogas technology will require adequate supporting policy framework.

The number of biogas systems in Germany has increased from 370 in 1996 to 3,891 in 2008 (AEE, 2009). In about the same period, the electricity supplied to the national grid from biogas systems also increased from approximately 60 kWel to 350 kWel on average (AEE, 2009), mainly due to implementation of the Renewable Energy Sources Act (EEG). Under the EEG, there is payment for supply of electricity from renewable resources (BMU, 2004a, 2009). Electricity from biogas currently accounts for about 1.6% of the total electricity demand (AEE, 2008), but the technical viability is estimated to be about 8.25 GW per annum (Kaltschmitt et al., 2005).

Biogas is produced by anaerobic digestion (AD) of organic feedstock, mainly, animal waste and crop residues, dedicated energy crops, domestic food waste, and municipal solid waste (MSW). The integrated processes include (Fig. 1), feedstock supply and pre-treatment; AD, gas treatment and alternative utilization pathways, and the recovery, pre-treatment and disposal of the digestate. Biogas is predominantly used to generate Combined Heat and Power (CHP), with the electricity feed-in to the national grid (Faulstich and Greiff, 2007). A scheme that allows for injection of bio-methane (upgraded biogas) into the natural gas grid is also in place, which has expanded biogas utility (FNR, 2006b). Specifically, the potential applications in the transportation sector, which has been 1

successfully deployed in countries such as Switzerland and Sweden, presents scope for expanded deployment.

Power Public grid, Local supply, Residental houses, Biogas plant

Heat Residental houses, Industry, Greenhouses, Heating digesters

Gas purification & enrichment

Combined Heat and Power (CHP)

Gas CNG vehicle fuel Natural gas substitute

Biogas

Biogas utilization Biogas production

Waste water treatment

Biogas storage Stage 1

Stage 2

Digestate storage and pre-treatment

Composting Fertilizer

Two stage anaerobic digestion

Animal waste, energy crops and crop residues Domestic food waste, industry waste streams and municipal solid waste

Organic feedstock

Feedstock storage

Feedstock pretreatment

Feedstock preparation

Feedstock supply

Fig. 1: Multistage biogas production systems

Biogas systems in Germany developed from predominantly small on-farm plants, using liquid manure and crop residue mixtures for feedstock. The introduction of supporting policy frameworks for renewable resources via the EEG led to proliferation of industrial-scale plants with elaborate logistics involving a wide range of feedstock (Görisch and Helm, 2006). These are organised in industrial parks and produce approximately 250 m3 of biogas per hour equivalent to ≈1 MWel/th on average. Like with other renewable energy resources, judicious expansion in the deployment of biogas technology is expected to contribute to reduction in GHG emissions and air pollution. For example, CO2 emission reduction potential of biogas CHP systems has been estimated at about 414 g CO2/kWh of electricity consumption compared to other renewable and fossil energy sources (Fig. 2). The underpinning AD process can also be used in integrated waste management, with the final digestate having useful applications in soil amendment and fertilizing. Since the required organic feedstock is renewable, with the right policy framework, security of energy supply could be enhanced. The objective of this study was to assess the energy policy framework supporting the deployment of biogas systems in Germany, by identifying the key incentives and barriers to its expanded deployment 2

as a renewable energy source. In the context of this paper, Policy Framework is set or course of action in Germany’s renewable energy sector that are intended to ensure technical and economically viable deployment of biogas technology, including maximisation of environmental impact mitigation arising from the replacement of fossil fuels.

1142 1100 897

g CO2 / kWh

900 700

703

500

398

300 23

100

39

61

508

89 116

-100 -300

-414

-500

Fig. 2: Comparison of specific CO2 emission associated with energy generation (Fritsche, 2007)

Material and Methods Fig. 3 depicts the components of biomass-to-energy conversion pathways in which AD process is an important energy conversion/refining process. It outlines the importance of close-coupling of the holistic bio-energy system from biomass feedstock resources and supply logistics, through conversion pathways and energy transmission and utilization, including environmental impact issues, primarily related to low carbon emission. Sustainability protocol must be cognisant of this coupling, whereby, waste from one process has potential for sustained utilization in other area (e.g., low grade heat, soil amendments, fertilizer or materials for AD process). Such is required for maximisation of net energy output and optimisation of energy balance, minimisation of negative environmental impact, and achievement of cost competitiveness against fossil fuels. The achievement of cost-competitiveness may necessitate preferential tax incentives.

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Fig. 3: Illustration of the close coupling of biomass-to-energy systems required for optimum efficiency, minimal environmental impact and achievement of cost competitiveness.

The complete chain of processes in the deployment of a biogas production system divides into; the plant implementation (including feedstock supply logistics and treatment of the digestate), biogas production, and biogas utilization elements. This study reviewed the biogas systems utilization in Germany, and analysed the supporting energy policy framework, in order to identify the key incentives and barriers to the potential for expanded deployment. The data used were derived from scientific literature, and technical reports, and corroborated with working experience of the authors and secondary interviews with industry stakeholders.

Active policy frameworks covering the incentives and barriers to implementation of biogas systems, biogas production, and utilization were analysed and discussed to challenge the technology and practice in sustainable utilization of biogas.

Results and discussion National and EU level policy incentives and barriers were found to have significant impacts on potential deployment. At national level, the German government developed an integrated energy and climate program, which is by far the broadest worldwide (Faulstich and Greiff, 2007). The intention is to create framework for structured reduction of GHGs by 2020, in which 25-30% of electricity and 14% of heat will be generated from renewable resources. The European Environment Agency 4

guidelines focus on environmental protection and sustainable energy supply. Germany’s Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) has implemented this policy goal by setting up a detailed action plan, including; energy efficiency measures, energy management schemes and sustainable practices. The Federal Environmental Agency in Germany identifies biogas technology as important for GHG emission reduction and a sustainable waste management system.

However, it was also found that only about 10% of the available feedstock resource potential of 417 PJ per annum is currently utilized (Table 1), which suggests that existing supporting policy framework needs to be enhanced for expanded deployment of biogas technology. Table 1: Feedstock resource potential in Germany (FNR, 2006a) Feedstock type Potential Realised PJ/a PJ/a Manure with litter 96.5 Crop residues 13.7 Farm waste 110.2 18.4 Energy crops 236.0 13.8 Municipal solid waste 12.5 Landscape conservation 12.0 Landfills 18.0 Waste water 19.5 Public households and municipality 62.0 7.5 Industrial sector 9.3 2.1 Total 417 41.8

Realised %

16.7 5.8

12 22.5 10

Policy framework supporting the implementation of biogas systems It was found that both environmental protection and economic considerations are key to plant location. Environmental regulations prevent installation in nature reserves and water protection areas. Economic considerations include; existence of road infrastructure (including transportation costs for both feedstock and digestate), existence of gas networks for bio-methane injection, and transmission efficiency limitations of district heating grids.

Generally, the performance of a biogas system will depend on the quality of installation, reliability of components used, and operator experience. In order to fulfil the minimum requirements for planning permission and safety standards, the feedstock delivery and digestate storage areas must be covered to eliminate odour emission. For example, biogas systems handling ≥ 30 tonnes of residues per day must meet limit odour emissions to a concentration of 500 OUE/m3 (Einfeldt, 2006). Noise pollution, e.g. from CHP generators must be within prescribed maximum thresholds outlined in Table 2. Process emissions are eliminated using airtight digesters and storage vessels, but outlet for unused gas is necessary for safety. Storage area for feedstock and digestate, as well as digesters must be leak proof to protect ground water. For safety reasons, hazard points e.g. rotating machine elements, 5

flammable/compressed gas lines or storage and locations with inherent danger of poisoning (feedstock, digestate, methane, and hydrogen sulphide) must be labelled, and protected or equipped with automated warning systems.

Table 2: Noise thresholds for biogas systems as specified in Federal Immission Control Act (BImSchG, 2007) by day Industrial area

by night 70 dB (A)

Commercial park

65 dB (A)

50 dB (A)

Rural area

60 dB (A)

45 dB (A)

Residential area

50 dB (A)

35 dB (A)

Spa area, hospital

45 dB (A)

35 dB (A)

Although all plants conformed to the minimum regulatory standards, in most part, Germany’s biogas systems had not adopted the best available technology. In addition, the anaerobic digestion (AD) process was deemed to be optimal in approximately 75% of plants surveyed (FAL, 2005). In light of the unstable feedstock prices and low electricity feed-in tariffs, feedstock flexibility and biogas system efficiency was considered to be important for future subsidy-free biogas system operation.

Policy framework supporting biogas production The national target is to provide 12.5% of electricity from renewable resources by 2010, and up to 20% by 2020 (BMU, 2007a), which generally supports an expanded deployment of biogas which is derivative of biomass resource. However, Fig. 4 shows that electricity generation from renewable resources is still more expensive compared to fossil fuels and justify the need for subsidy in the short term.

Fig. 4: Comparative costs for electricity generation from fossil fuels and renewable resources

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Under national environment protection and energy saving programme, low-interest loans directed to the protection of environment, soil, water and air, and utilization of renewable energy resources are available for small-scale biogas systems (KfW, 2008) which acts as policy incentive for increasing investment into this technology. Large-scale biogas projects are often financed by power utility companies in collaboration with manufacturers of biogas systems.

The Renewable Energies Act (EEG) is the most significant subsidy scheme for biogas system operators. It guarantees payment for feed-in of electricity generation from biomass (excluding wood fuel) to the national grid over a period of 20 years. The payment is decreased by 1% annually, with the aim of encouraging plants to operate profitably, therefore achieve gradual independence. The EEG provides additional payments for exclusive usage of renewable raw materials (RRM), co-generation of CHP, and technology innovations. The amended EEG that is effective from 2009 only supports systems of up to 20 MWel, as it is intended to discourage commissioning of large-scale centralised biogas systems; as opposed to small-scale decentralised units that promote rural development. Table 3 shows the feed-in tariffs for electricity generation under the EEG compared to average costs per kWhel, which means that unit costs in biogas production still exceeds basic tariff of the EEG unless additional criteria of the bonus scheme can be fulfilled, hence, biogas technology still relies on subsidies.

Table 3: Feed-in tariffs for electricity generation under the Renewable Energy Resource Act (EEG) and average production costs per kWhel (Adopted from (Walla and Schneeberger, 2008)) Capacity, kWel Basic tariff, Incremental tariff by bonus scheme, cents/ kWh Total cost cents/ kWh per kWhel 2 CHP 2.0

Technology 3.0

Liquid Manure 4.0

Landscape work material/ clean air 2.0/ 2.0

17.46

≤ 150

11.67

RRM1 7.0

150 to 500

9.46

7.0

2.0

3.0

1.0

1.0/ 1.0

15.85

500 to 5,000

8.51

4.0

2.0

3.0

---

---

15.26

5,000 to 20,000

8.03

4.0

3.0

---

---

---

14.5

1

Renewable Raw Materials 2 Assumed costs per unit for biogas systems with installed generation capacity of up to 500 kWel and 80% operation efficiency

Agricultural waste and energy crops were the most suitable feedstock because of their easy availability and their optimal characteristics for AD process, coupled with available ecologically friendly digestate disposal options. Although biogas production from liquid manure has ecological advantages, only 15% of the resource was used. Although the regulation covering fertilizer

7

application in agriculture sets the limits for nutrients application on farmland for protection of water, soil and the ecosystems, organic fertilizer is cheaper and more environmental sustainable. Biogas yield from corn silage of up to 489 m3 per ton of dry matter could be achieved, compared to 250 m3 for cattle manure (Table 4); therefore, energy crop feedstock was technically more attractive, although with potential negative ecological impacts for monocultures (Hufnagel, 2007). Energy crops are covered by the EEG which is key incentive for their production and utilization as biogas feedstock. Due to the global grain shortage, there is no restriction on set-aside land for crops that are not intended for use as food or animal feed (EU, 2007), therefore, 1.6−2.9 million ha in the EU is expected to return to crop production. However, unstable grain feedstock prices, exacerbated by competition for the limited land and biomass-to-energy pathways (Heck, 2007), e.g., versus pharmaceutical/cosmetic industries (Faulstich and Greiff, 2007), has created uncertainties for operation of plants that use grain feedstock.

Table 4: Estimated biogas yield per dry matter by feedstock options Feedstocks Dry matter content Biogas yield 2 (DM)2, m3 tDM-1 Cattle manure Corn silage Municipal solid waste (MSW)1 Food residues Grease separator 1

2

8% 35% 40-52% 16% 43%

250 489 200-770 906 1181

Compositions of MSW is highly variable and can significantly influence biogas yield (RHB, 2009; Wiljan, 2009) Data adopted from (KTBL, 2007)

The Federal Government’s regulations on recycling and waste management and disposal of biowastes and sludge focus on achieving a closed cycle of matter designed to generate quasi zero-waste (Fig. 5). Due to ban on disposal of MSW to landfills (Saft and Elsinga, 2006), AD in biogas systems is an attractive waste management alternative. Organic waste from agri-food industry and municipal solid waste (MWS) streams provide attractive feedstock options due to ready availability in terms of waste characteristics and high biogas yield (Table 4), and potential revenue from associated gate fees (Table 5). However, regulations under the European Hygiene (EU) Ordinance no. 1774/2002 require their pre-treatment prior to use, and there is a knowledge gap on co-digestion technology with regards to differences in homogeneity and degradation for the AD process control. Additional costs for source separated collection of MSW and pre-treatment like sterilisation and sorting prior to AD in biogas systems as a technique for waste disposal was found to be significant. This makes the AD process less competitive against alternative disposal methods like incineration, which does not need pre-treatment.

8

Fig. 5: Closed cycle of matter designed to generate quasi zero-waste

Table 5: Gate fees for waste disposal in Germany (IFAT, 2008; Mathews, 2008) Disposal Waste stream Gate fees, €/t plant/method Incineration 60 – 350 Composting: Unpacked food waste 35 – 45 75 – 95 Packed (expired food)1 Biogas system: Municipal solid waste (MSW) 30 – 40 Waste of industrial sector 25 – 30 1 Includes pre-treatment costs for the composting process

Policy framework supporting biogas utilization As previously outlined for the integrated biomass-to-energy pathway outlined in Fig. 3, it may be argued that, the urgency to develop security of energy supply and environmental impact mitigation rationalises the preferential tax treatment of renewable energy sources. Such may be implemented via energy tax exemption for biogas used with both stationary plant and in the transport sector. However, it is recognised that tax incentives alone will not meet environmental objectives; therefore, other policy instruments covering utilization have been developed. The EU Greenhouse Gas Emissions Trading System in the National Environmental Policy is intended to meet the set targets in the Kyoto protocol. Emission trade focuses on energy utility companies and the manufacturing sectors which account for 45% and 12.5% of the total CO2 emissions, respectively (UBA, 2007a). Large power plants (>20 MW thermal capacity) and other energy intensive plants have prescribed maximum emission allowance, but additional emission allowance can be purchased through a dedicated stock markets, while emission reduction credits can equally be traded. Methane content in the digestate is reduced by 95%, which is the key advantage of biogas in emission trading. 9

The Renewable Heat Energy regulation provides financial support via a Market Incentive Program (MAP) and the extension of the district heat network, which are all relevant to supported deployment of biogas technology. The seasonal demand for heat has to be considered in the planning process for biogas systems. For efficiency, exclusively production of heat is less attractive than CHP. The most common application of the heat output is for heating of digesters and the local residential houses and animal stalls, but other possible uses include grain drying, production of animal feed, and drying of wood fuel (Aschmann et al., 2007). The Renewable Energy Resource Act (EEG) favours biogas utilization for CHP. Typical output of CHP generation from biogas is about 2/3 thermal and 1/3 electricity at 80-90% efficiency (FNR, 2006b), which provides scope for enhancement of operational efficiency and therefore reduced cost with co-generation. Upgrading of biogas to natural gas quality (bio-methane) in Germany is governed by the regulations for access to natural gas network (GasNZV) and by payments for natural gas network (GasNEV). These regulations are aimed at offsetting the typically cost-intensive biogas upgrading technology (see related cost elements in Table 6), which are deemed to be economic only for large-scale biogas systems. Available data suggest that the break-even point for economic bio-methane production specifically for injection into the national grid is in the region of 1 MW at volumetric flow of at least 250 m3/h (FNR, 2006b) to more than 2 MW for 500 m3/h (Helm, 2008). Anyhow, upgrading of biogas to natural gas quality could support rapid utilization expansion. Lower transmission losses, possibility for decentralised biogas production (i.e. closer to feedstock source to minimize transportation cost), and potential transmission to expansive market supports this view.

Table 6: Cost elements for upgraded biogas depending on different factors (FNR, 2006b) Cost elements for upgraded Cents Influencing factors biogas per kWh Biogas production costs 3.5–8 Feedstock type, plant size, volume flow of biogas Preparation costs 2–6 Volume flow of biogas Grid injection/conveyance fees 0.3–2 Volume flow of methane, transmission distance Total 5.8-16

Transport energy policies include the German Biofuels Quota Act (BioKraftQuG), the Biofuels Roadmap and tax exemptions for biofuels (BMU, 2007b). The policies, e.g. the Biofuels Roadmap, favour increased utilization of renewable fuels such as bio-methane as they are deemed to be sustainable. The German Biofuels Quota Act targets the replacement of 4.4% diesel and 3.6% petrol with biofuels by 2015. Realisation of these targets can be enhanced by increased utilization of biomethane. Economic benefit of using bio-methane as transport fuel depends on cost competitiveness against petrol and diesel. Bio-fuels incur no CO2 tax and lower energy tax (Table 7) compared to diesel and petrol, and therefore have lower pump prices, which is a supporting framework for deployment of bio-methane (FNR, 2006c). 10

Table 7: CO2 and energy tax and prices for different vehicle fuels (Anonymous, 2008; FNR, 2006c, 2008d) Cost by category of vehicle fuel Diesel Petrol Natural BioBiodiesel BioVegetable BtL gas methane 3 ethanol (rape oil) CO2 tax €/gCO2 per km 4

2.00

2.00

0

0

0

0

0

0

Energy tax €/litre

0.47

0.65

0

0

0.15 0.451

02

10.00 0.451

02

Pump price €/ litre

1.10 – 1.50

1.30 – 1.50

0.60 petro 0.66 diesel

0.80 – 0.90

0.80 – 1.05

0.45 – 0.60

0.60 – 0.80

1.00 – 1.20

1

Year 2012 Year 2015 3 Euro/ kg 4 For exceeding of CO2 emission limit for vehicles additional costs are regulated: 2010/11: 120 gCO2; 2012/13: 110 gCO2; 2013/14: 95 gCO2 2

Within the biofuels range, bio-methane is most expensive, although it is the most competitive in respect to fossil fuel equivalence and attainable travel distance per ha of primary resource production (Table 8). Key barrier for use of bio-methane as transport fuel is the limited infrastructure of filling stations.

Table 8: Comparison of biofuels (FNR, 2006c, 2008d) Vehicle fuel Fuel equivalent (l) Distance (km/ha (diesel, petrol = 1) resource)

CO2 savings (kg /l biofuel)

Production costs in average (€/ l)

Bio-methane Bio diesel

1.42 0.91

67,600 23,300 – 40,900

1.15/ kg 2.20

1.044 0.63

Bio ethanol Vegetable oil (rape oil) Btl 1

0.65

22,400 – 36,8003

1.15 – 2.403

0.22 – 0.643

0.96 0.97

23,300 – 40,900 64,000

2.20 2.53

0.49 1.00

1

Biomass-to-Liquid Bio-methane in (kg), made from corn silage 3 Depends on feedstock used 4 Euro/ kg 2

Conclusions The current exploitation of only 10% of the biogas feedstock potential in Germany suggests that existing policy framework may be unable to support expanded deployment. An enhanced policy framework for increased utilization of biogas systems should: (1) eliminate the barriers to implementation of biogas systems. For example, the interests of different stakeholders like neighbouring communities (due to noise and odour emissions) and local authorities (environmental protection and provision of support infrastructure) as well as the performance standards, e.g., safety standards should be coordinated. To ease the implementation

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process, the number of regulations and communication between relevant administrative bodies should be coordinated and harmonised. (2) promote wider feedstock range for biogas production. Fluctuation of feedstock availability and pricing requires R&D geared to developing alternative co-digestion scenarios for agri-food industry and MSW streams, as alternatives to dependence on feedstock from agricultural sector, which also offers a sustainable waste management strategy option. (3) encourage more efficient biogas utilization. High biogas plant efficiency can be achieved by maintaining of economic incentives to generate CHP, robust electricity and gas grid infrastructure for easier access by biogas systems, develop utility market for electricity from renewable resources by maintaining CO2 tax on fossil fuels and implementation of “green” certificates to foster production cost parity with fossil fuels.

Acknowledgement This study was funded under the Charles Parsons Energy Research Programme (UCD) of Science Foundation Ireland (SFI), and the Dissertation Fellowship of the Universities of Applied Science in Bavaria, Germany.

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