Barriers to biogas market entry in the US the German experience

Institut für Energetik und Umwelt Institute for Energy and Environment www.ie-leipzig.de Barriers to biogas market entry in the US the German experience AHK-Geschäftsreiseprogramm Erneuerbare Energien April 25th, 2007, Minneapolis Dipl.-Ing. Frank Hofmann, Dipl.-Bw. Dirk Volkmann Research, Development & Services for - Energy - Water - Environment Institute for Energy and Environment ggmbh, Torgauer Str. 116, D-04347 Leipzig, dirk.volkmann@ie-leipzig.de

Energy Crops Miscanthus, Triticale etc. Biomass as a source of energy Agricultural Residues Straw, Forest Residues etc. Organic By- Products Manure, Industrial wood residues etc. Harvesting, Collecting, Treatment, Storage, Transport Organic Waste Sewage Sludge, Slaughterhouse waste etc. Thermo-chemical Conversion Physical-chemical Conversion Bio-chemical Conversion Carbonization Gasification Pyrolysis Pressing/Extraction Transesterification Alcoholic Fermentation Anaerobic Digestion Composting Solid Fuel Coal Product gas Pyrolysis oil Vegetable Oil PME Ethanol Biogas Solid fuel Gaseous fuel Liquid fuel combustion Electrical Energy (Fuel Cells) Thermal Energy Thermo-mechanical Conversion Power Heat source: Institut for Energy and Environmant ggmbh

1. What is Biogas? 2. Why Biogas? 3. Biogas in the US

a typical German biogas plant manure organic waste digested sludge electric energy biogas heat

Substrates - Biogas production rates - Substrate DS ods Biogas production CH 4 -cont. [%] [% DS] m³/t FS [m³/t ods] [Vol.-%] liquid manure (cow) 8-11 75-82 20-30 200-500 60 chicken manure ca. 32 63-80 70-90 250-450 60 Maize silage 20-35 85-95 170-200 450-700 50-55 beer residues 20-25 70-80 105-130 580-750 59-60 potato sludge 6-7 85-95 36-42 400-700 58-65 fruit slugde 2 3 ca. 95 10-20 300-650 58-65 molasses 80-90 85-90 290-340 360-490 70-75 fruit residues 25-45 90-95 250-280 590-660 65-70 organic waste 40-75 50-70 80-120 150-600 58-65 food waste 9-37 80-98 50-480 200-500 45-61 market waste 5-20 80-90 45-110 400-600 60-65 grease from grease catch basin 2-70 75-93 ca. 700 ca. 700 60-72 green cut ca. 12 83-92 150-200 550-680 55-65 DS=Dry substance content ods=organic dry substance content FS = fresh substance

Technical Overview (1) Substrate Preparation, Feeding

Technical Overview (2) - Reactor, Example -

Technical Overview (3) - Gas cleaning and storage, Example -

Technical Overview (4) - Energy from Biogas, Examples

Technical Overview - Gas utilization, Examples Supply to the grid Substance Biogas Gas from WW sludge Natural Gas Methane 50-70 % 60-70 % 93-98 % Carbon Dioxide 25-40 % 30-40 % 1 % Nitrogen < 3 % 4 % 1 % Oxygen < 2 % 1 % - Hydrogen Traces Traces - Supply to pipeline grid heat Hydrogen Sulfide bis 4000 ppm bis 1000 ppm - Ammonia Traces Traces - Ethane - - < 3 % Propane - - < 2 % Natural gas Kompogas-fuel station fuel Siloxane Traces < 6mg/m³ - Energy per m³ Biogas: ca. 5-6 kwh

chart: compensation for power from biomass in Germany (according to the EEG [German Renewable Energy Law] BGBl 2004 Teil 1 Nr. 40, S. 1918, July 31, 2004) (figures in $ cent/kwh [1 = $ 1,35]) basic compensation up to 150 kwel up to 500 kwel up to 5 Mwel above 5 MWel existing plant as up to now as up to now as up to now as up to now new plant 15,5 13,4 12 11,3 from 1.1.2005 15,3 13,2 11,8 11,1 from 1.1.2006 15 13 11,6 11 from 1.1.2007 14,8 12,8 11,5 10,8 Renew-Bonus existing plant 8,1 8,1 5,4 - new plant 8,1 8,1 5,4 - CHP-Bonus existing plant - - - - technology-bonus (only when CHP prerequisite is fulfilled) new plant 2,7 2,7 2,7 2,7 existing plant - - - - new plant 2,7 2,7 2,7 compensation period: 20 years + commissioning of the plant

System comparison with other Renewable Resources Energy from Wind Power Energy from Photovoltaics Energy from Hydroelectrics Energy from Biogas Time elapsed in days over 1 year Time elapsed in h over 1 day

annual yields per 1 ha of farmland biomass HV 1550 litre Biodiesel = 1,411 l Diesel 1690 litre Bioethanol = 1,690 l gasoline 4000 litre BtL-Diesel = 3,720 l Diesel Wood, other plants 3560 kg Biogas = 4,984 l gasoline Plants, manure, biowaste Main components Rape seed and vegetable oil Grain, sugar beet Source: Der Spiegel, 8/2007

how far can a car go with fuel from 1 ha? Biomethane 42,000 miles BtL 39,800 miles canola 14,500 miles (25,400 miles)* Biodiesel 14,500 miles (25,400 miles)* Bioethanol 13,900 miles (22,900 miles)* * incl. Biomethane from residues (canola cake, distillers etc.) Source: FNR

Environmental Analysis - Local Environmetal Effects - Reduction of odour emissions Reduction of pathogens within the slurry Reduction of greenhouse gas emissions during storage and utilization (methane is a greenhouse gas approx. 21 times more effective than CO2 at trapping heat!) Mineralization of organic nitrogen compounds (i.e. better nitrogen availability for crops and thus better substitution of mineral fertilizer) Decrease in leaching of nitrogen from top soil Increase in ammonia emissions during storage and utilization Decentralized energy supply

Markets in the US Farms (animal and crop operations) Animal sector Candidate farms Generating potential in MW Generating potential in MWh/year Swine 4,300 363 3,184,000 Dairy 2,600 359 3,148,000 total 6,900 722 6,332,000 Source:EPA Food processors Large power and heat users with high retail energy costs (factories, school campuses, office buildings, institutions, etc.) Biodiesel and ethanol producers

Market factors in the US i. Heterogeneous markets market factors within any given state and regions there can be substantial differences in the quantity and quality of substrates for individual projects there are no identical drivers: nutrient management, regulatory compliance, post digestion fibers, renewable energy sales competing for resources with biodiesel and ethanol producers

Market factors in the US ii. iii. iv. Limitation from power purchasing agreements (ppa) Need for level playing field Poor industry record v. Need for better business model vi. Lack of legislative support (RPS driven vs. free-market approach) vii. Small industry

How Renewables can cut carbon emissions energy efficiency and renewable energy technologies can reduce carbon emissions by the necessary 60-80% by 2050 (according to Tackling Climate Change in the US American Solar Energy Society) 57 % of the total carbon reduction contribution can come from energy efficiency and 43 % from renewable energy this makes up to 688 million ton could come from energy efficiency, about 181 million from wind power while solar power, photovoltaics, biofuels, biomass and geothermal would make up the rest of the contribution renewable energy has the potential to provide approx. 40 % of the US electric energy projected for 2030! source: Renewable Energy World, March-April 2007

How to finance projects with public funding USDA announced notice of funding availibility for energy efficiency and renewable energy loans and grants of $ 176.5 million in loan guarantees and 11.4 million in grants on March 21, 2007 Loan guarantees cover up to 50 percent of a project s cost, not to exceed $ 10 million grants are available for up to 25 percent of a project s cost, not to exceed $ 500,000 for renewable energy projects applications are due May 18, 2007

What are the advantages of biogas systems to farms? Tangible benefits New revenue streams from existing and undervalued farm products and wastes (electricity, heat, fiber) Farm growth potential from nutrient management Reduced potential liability from environmental noncompliance Reduction / elimination of chemical fertilizers

Non-tangible benefits odor reduction from animal waste management i) Pathogen control (incl. fly infestation, weeds, etc.) ii) Protection of ground water resources due to effective nutrient management iii) Improved crop yields iv) better PR for farming sector v) benefits to local economy vi) reduction of environmental emissions

What are the advantages of farms as a target market? Often have high value for Renewable Energy Credits (REC) and Renewable Energy Attributes (REA) Available and inexpensive crop and waste feedstocks Available equipment and expertise Ability to take in and apply food waste to land Vast number of potential farm projects Many grant resources

advantages of a biogas system to food processors? Waste reduction and treatment reduces costs Power and heat production onsite offsetting retail energy rate Reduction of odors or potential pollutant effects Positive public image a biodiesel or ethanol plant? Biodiesel produces glycerin and other organic waste which can be used as a feedstock Biodiesel can consume the low temp. heat from power production in the process and power at retail rate Ethanol can use the distillers grain as a feed stock Ethanol can use the biogas to burn directly in the ethanol production process large energy users? Offsetting retail rate for power and heat on a larger scale and less seasonal variation Can use food waste generated on-site (canteen etc.) Positive green and pro-farm image Potential moderate value for REC s and REA s

the challenge most biogas companies in the US are of european origin without specific knowledge about the US market to make plants more efficient and cheaper larger sums of money have to be invested into R&D if you are going to invest into biogas look for a sound and proven technology with a good number of references, guarantees and a vital economic background of the supplier

the challenge the system has to be simple (avoid technology you don t need) take only the best quality (compare systems, references and visit plants) have a concept and trained people you have to make money (Input/Output balance moneywise and energywise)

Wordwide forcast: Biogas Rapidly growing sector but development from a quite low level predominance of Western Europe more than half of new capacities until 2020 up to 9.500 MW installed capacity in Germany this is about 17% of the power production German market volume 2005: 490 Mio. with yearly growth of 40% until 2010, approx. market volume in 2020: 7,5 Mrd. German utilities announce engagement in biogas (e.g. Gelsenwasser, E.ON Ruhrgas, RWE) Feeding biogas to the gas pipeline grid momentarily on a voluntarily basis of all gas distributors, in Austria as of June 1st, 2006 the grid was opened on basis of a regulation, growing markets in Sweden, Switzerland and Germany

Conclusion (1) - Advantages - Decrease of odour emissions and CO 2 -emissions low energy needs during biogas production Production of a fertilizer with easy handling and advantages regarding ecologicy as well as plant availability Flexible technology for small scale and large scale applications Construction of parts of the plants can be carried out locally Very fast construction possible Low investment and operation costs Decentralised installation allows economically feasible solutions for decentralised energy supply Biogas production is a step for closing the energy- and nutrient cycle

Conclusion (2) - Biogas as a Renewable Source for Energy Biogas is a promising option for energy provision in rural areas. The technology is available and works well; there are high and low tech systems available. The potentials are high and biogas can therefore contribute significantly to cover the given energy demand. The electricity generation costs are reasonable and can compete with other sources of energy; additionally there are promising side effects not accounted for within the cost calculations in general. The environmental effects of using biogas are promising; biogas can contribute easily e.g. to the reduction of greenhouse gas emissions and thus help to fulfil the Kyoto commitments. Therefore biogas will become increasingly important in Germany and in Europe - and expected in China too.

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Core competences: About us analyses and evaluations of renewable / conventional energy-systems and of the utilization of renewable energy sources: generation of energy from geothermal sources and from biomass (i. e. use of solid biomass for the generation of heat, power and fuels, the production and use of biogas as well as the production and use of fuels based on vegetable oil and alcohol). We re open for cooperation with other research & development bodies

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